Key Insights:
Ripple co-founder Christian A. Larsen has filed a notice of appearance in the court against SEC's appeal.
The regulator had appealed in the Appellate Court against the judgment of the District Court of SDNY.
Ripple and the SEC might fight another legal battle on XRP's security status.
If the case goes to trial once again, XRP may lose all the potential gains it made in the alt season.
Christian A. Larsen, co-founder of Ripple Labs, has filed a Notice of Appearance in the Appellate Court after the SEC filed an appeal against the court ruling of the District Court of the Southern District of New York.
The regulator had appealed that the judgment by the lower court was intervening in its jurisdictions.
Ripple's Chief Attorney Stuart Aldorty claimed this would have zero impact on XRP's security status.
The district court of SDNY had substantially decreased the SEC's penalty on Ripple Labs while holding that the XRP was not a security.
The judgment on both cases, whether institutional sales or retail sales of XRP, was significantly in favor of Ripple Labs.
In the institutional case, XRP was fined $125 million for selling XRP to institutional investors. This penalty was significantly lower than the $2 billion penalty imposed by the SEC.
Interestingly, the SEC never imposed a penalty exceeding the sales figures, which in this case were $1.3 billion (both institutional and retail sales combined).
Previously, in August 2023, the verdict of the retail case was in favour of XRP, and the court ruled that XRP was not a security as it did not pass the Howey Test.
However, the SEC did not go well with the institutional case judgment, which claimed that the court intervened unnecessarily with its jurisdiction.
Its appeal repeated the usual arguments that Ripple executives solicited investment from corporates, which amounted to security sales.
In response to this, Stuart Aldorty claimed that the non-security status of XRP remains unchanged despite this appeal.
The FIT-21 was passed as an act by the U.S. Congress properly alienating jurisdictions for cryptocurrencies and exchanges.
Cryptocurrencies were to be governed by the SEC or the CFTC depending on whether they were centralized or not. Centralization will be determined if a single party (individual or institution) has more than 20% of the circulating supply. If yes, it would be a centralized crypto and governed by the SEC and if no, it would be a decentralized crypto governed by the CFTC.
Further, as per the act, exchanges were to be jointly regulated.
However, in the case of Ripple vs. SEC, the act does not give any clear direction, as the legal dispute between the two opponents concerns whether XRP is a security. If found to be a security, XRP would be governed by the SEC Act and not the FIT-21 Act.
XRP Price Trend in the Last 30 Days
CoinMarketCap
After making a local high of $0.66 on 2 October 2024, XRP slid down to $0.52 levels. The slide was most probably due to the news of the SEC appeal, which it eventually did by 16 October.
If this case drags on further, the price of XRP might remain suppressed for still the current SEC chairman retires in April 2026 or at least as long as this case drags on.
The SEC vs Ripple Case has already dented the price of XRP a lot. Comparing the prices of Bitcoin and Solana, we see a 312% and a 1000% gain, respectively.
If the case had not dragged XRP down, it would have risen to a price range of $2 to $5 by early 2024.
Its fundamental value could have helped it gain even further. Ripple has a strong presence in the tokenization space in Latin America and in the North American money remittance business.
If this case goes to trial, we expect XRP's price to remain suppressed throughout the alt season. We also assume the trial will go into 2026, and there seems to be no way to finish it unless SEC Chairman Gary Gensler moves out of his office.
However, if crypto investors realize their market share in top sectors like RWA, cross-border payments, and liquidity provisioning, the price may skyrocket before the end of the case.
Though we expect the case to not go to trial, the uncertainty in legal processes limits our outlook for the future.
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