The U.S. Securities and Exchange Commission has filed an appeal in its July 2023 legal battle with Ripple Labs against a ruling partially dismissing claims against the company.
The appeal, filed late Wednesday, focuses on whether Ripple's XRP sales to retail investors qualify as unregistered securities transactions under federal law.
Referring to the Hawaii test, the SEC said that Ripple's promotional efforts have created expectations of profit among investors, making XRP an investment contract.
Ripple and the SEC did not immediately respond to Decrypt's request for comment.
While the regulator previously filed the appeal in mid-October 2024, following a district court's partial ruling in favor of Ripple in July 2023, Wednesday's opening brief represents a formal step in the appeals process, with the SEC outlining its arguments to challenge the court's earlier decision.
The agency's district court ruled that sales of crypto exchanges did not meet this requirement, emphasizing that investors' expectations depend not on the identity of the seller, but on the conduct of the issuer.
The brief challenges a lower court's decision to exempt XRP distributed for non-cash transactions as employee compensation and business incentives from securities laws.
The SEC will ensure that the labor and services received in exchange for XRP meet the “investment of funds” criteria set forth in the Hawaii Framework.
Ripple's legal team has consistently denied the SEC's claims, maintaining that XRP is a digital currency, not a security.
On Wednesday, Chief Legal Officer Stuart Aderotti called the SEC's latest filing a “rehash of failed litigation,” a case that would slow the pace under the Trump administration.
The outcome of the appeal could have far-reaching implications for the crypto industry. Industry stakeholders see the case as a wake-up call for regulatory transparency on digital asset allocations.
Overturning could encourage the SEC to pursue similar cases, but failure could reduce its enforcement powers.
In the year The controversy, which began in late 2020, has drawn a lot of attention from investors and lawmakers.
Ripple has described the SEC's enforcement actions as a barrier to innovation, framing the issue as part of a broader debate over the future of crypto regulation in the United States.
The decision of the Court of Appeal is not expected until the end of this year.
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