SEC claims some parts of Ripple's ruling were "wrongly decided" and shouldn't be followed.
The United States Securities and Exchange Commission (SEC) is considering an appeal against a recent decision in its lawsuit with Ripple Labs. The ruling in question classified Ripple's XRP as a non-security for retail investors.
The SEC believes this ruling sabotages “fundamental securities laws principles.” According to the SEC, the key feature among these principles is the Howey Test, which helps identify what constitutes an investment contract.
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The SEC's position was revealed in a separate lawsuit that the securities regulator has lodged against Terraform Labs and its founder, Do Kwon. The SEC has accused them of “orchestrating a multi-billion dollar crypto asset securities fraud.”
In a July 21st response to Terraform Labs' motion to dismiss, which referenced the Ripple Labs ruling, the SEC unveiled its objections related to the Ripple case ruling. The regulatory body asserted that the Ripple ruling, especially concerning sales, clashed with the Howey test and added unnecessary requirements.
The SEC has also disagreed with parts of the Ripple ruling, stating that some sections were wrongly decided and should not be followed. The SEC staff is now exploring the possibility of an appeal.
Respectfully, those portions of Ripple were wrongly decided, and this Court should not follow them. SEC staff is considering the various available avenues for further review and intends to recommend that the SEC seek such review.
SEC Chair Gary Gensler expressed his disappointment with the ruling a few days after it was issued. In a July 17th interview, Gensler noted the commission's satisfaction that a token for institutional investors was classified as a security. However, he conveyed disappointment about the decision regarding retail investors.
Gensler was also questioned about the need for more precise regulation in the industry during a talk on artificial intelligence at the National Press Club. However, he did not provide a specific answer to this question.
The SEC's potential appeal to the Ripple Labs case ruling indicates the ongoing complexities and legal challenges in the evolving cryptocurrency industry.
