The SEC has asked a judge to ignore part of a recent ruling in a lawsuit against Ripple because it does not comply with applicable securities laws and could be appealed. This is reported by Bloomberg.
The regulator filed a lawsuit against Ripple in 2020, accusing the company of distributing about $1.3 billion worth of unregistered securities in the form of the platform’s native tokens. On July 13, 2023, Judge Analisa Torres ruled that selling XRP directly to institutional investors violated SEC rules, while offering it to retail investors on exchanges did not.
In an updated lawsuit against Terraform Labs and its CEO Do Kwon, the agency said the verdict “creates an artificial distinction between the expectations of institutional and retail investors.” According to the regulator, the ruling “erroneously transforms” the decades-old Howey test into a subjective standard. The SEC asked the court to disregard the ruling in the Ripple case and signaled it was considering filing an appeal.
The Commission’s comment came after lawyers for Terraform Labs and Kwon filed a statement calling the Ripple decision supportive of their motion to dismiss the regulator’s lawsuit. According to the lawyers, Judge Torres’ ruling “confirms the legal untenability of the SEC’s assertion” that some tokens, including the TerraUSD stablecoin, were securities because of the way they were sold.