Ripple won a partial victory against the SEC, with XRP being declared a non-security in July 2023 and August 2024.
However, the SEC plans to appeal the ruling and challenge the non-security status of XRP.
Whichever way this lawsuit turns out, it is expected to affect the price of XRP and investor confidence.
XRP's price has been notably volatile this week due to these events.
Ripple Labs, the issuers of the XRP cryptocurrency, celebrated a major win this week. A year after its initial ruling, a federal court reaffirmed that XRP was a non-security and that Ripple could walk away with a $125 million fine.
The price of XRP rallied strongly by 25% on the news, with several calls for an “XRP pump” to $3 or even $5.
The court’s final ruling
However, there are now signs that the victory may be short-lived, and Ripple might be dragged right back into court.
The SEC now plans to appeal the ruling, request that the judge reconsider classifying XRP as a security, and possibly recommend a harsher fine for Ripple.
Here are the details and what this means for the broader crypto industry.
To start with, this appeal was predicted by crypto lawyer Preston Byrne in a tweet on Wednesday.
Recall that in July 2023, Judge Analisa Torres granted Ripple a partial summary judgment and restated Ripple's innocence again this week, more than a year later.
However, according to Fox Business journalist Eleanor Terrett, the SEC has no plans to accept defeat and is reportedly planning to appeal the ruling.
Terrett reported that the SEC’s appeal will likely target the court ruling from Wednesday this week.
The journalist reports that she reached out to the SEC and got a response from a spokeswoman who stated:
“As court after court has stated, the securities laws apply when firms offer and sell investment contracts, regardless of the technology or labels that they use."
This means that the agency doesn't fully agree with the court's decision and that the institutional sales from 2017 should be classified as unregistered securities.
Recall that the SEC initially requested a fine of around $2 billion from Ripple in the court case.
While the current figure of $125 million is a substantial one on its own, the spokeswoman from the SEC hinted that the agency might implore the judge to revisit the numbers in favour of a harsher penalty.
Terrett, though, admitting that she isn’t a lawyer, mentioned that both Ripple and the SEC likely feel that they got the better part of the deal.
Ripple, on the one hand, is celebrating nearly a 95% reduction in the original fine, while the SEC, on the other hand, is celebrating because Ripple now has to pay twelve times the original $10 million fine it originally suggested.
This said, the SEC is more likely to leave the fines for now and appeal only the 2023 ruling in which Judge Torres termed XRP a non-security.
There are still some questions about the ongoing case, though.
For example, the Howey test does not state whether a written document is necessary to classify crypto as a security or non-security.
This question is important, considering how Ripple’s defence has been based on the argument that XRP cannot be considered a security without a written contract—a premise that the SEC will likely attack in court.
Overall, the final outcome of the Ripple-SEC case is bound to have a noted effect on the crypto market as a whole, on the price of XRP and on its investors.
XRP’s price performance
According to CoinMarketCap, XRP is in the middle of a price decline at the time of writing, with a 3.5% intra-day dip from $0.63 to $0.58.
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