SEC asked the judge to ignore part of the recent ruling in the suit against Ripple, as it does not align with current securities laws and could be appealed. This was reported by Bloomberg.
The regulator filed suit against Ripple in 2020, accusing the company of distributing unregistered securities worth about $1.3 billion in the form of the platform’s native tokens. On July 13, 2023, Judge Analisa Torres ruled that the sale of XRP directly to institutional investors violated SEC rules, while offerings to retail investors on exchanges did not.
In the amended complaint against Terraform Labs and its CEO Do Kwon, the agency said the verdict “creates an artificial distinction between institutional and retail investor expectations.” According to the regulator, the ruling “wrongly converts” decades-tested Howey test into a subjective standard. The SEC asked the court not to consider the Ripple ruling and signalled that it is weighing an appeal.
The regulator in February brought charges against Terraform Labs and Do Kwon for orchestrating a multi-billion-dollar fraud.
Representatives of the SEC also told the judge that the Ripple ruling, with respect to large investors, works in the agency’s favor.
«Institutional buyers, such as trading firms that purchased the defendants’ crypto assets without limits on resale, bought them because they viewed them as an opportunity to invest in Terraform Labs’ efforts,» the agency said.
As noted earlier, former SEC attorney John Reed Stark described the Ripple verdict as ‘shaky’ and noted a high likelihood of its successful appeal.