SEC Appeals Ruling on Cryptocurrency Regulation

By Jonathan Stempel

NEW YORK (Reuters) – The U.S. Securities and Exchange Commission (SEC) announced on Wednesday that it is appealing a court ruling that limited its authority to regulate cryptocurrency markets.

Wall Street’s primary securities regulator will seek a review from the 2nd U.S. Circuit Court of Appeals in Manhattan regarding a July 2023 decision which determined that the XRP token, sold by Ripple Labs on public exchanges, does not meet the legal definition of a security.

The ruling by U.S. District Judge Analisa Torres indicated that the sales of XRP, amounting to approximately $757 million, were not subject to the investor protection laws enforced by the SEC.

If the appeals court agrees or defines securities narrowly, it could hinder the SEC’s ability to regulate cryptocurrency exchanges like Coinbase (NASDAQ:COIN) and other entities dealing with newer, non-traditional financial products.

However, the ruling granted the SEC a partial victory, stating that another $728 million in XRP sales to institutional investors must comply with securities laws.

Judge Torres fined Ripple $125 million in August, but the enforcement of this fine is on hold pending the appeal process. The SEC initially sought a $2 billion penalty. The stay on the fine will remain in effect until the 2nd Circuit makes a ruling, according to court records.

Ripple is also permitted to appeal parts of Judge Torres’ rulings that it disputes.

Ripple CEO Brad Garlinghouse described the SEC’s decision to appeal as “misguided” and “infuriating,” though not unexpected.

“While we will fight in court for as long as necessary, it’s important to recognize that XRP’s status as a non-security is currently the law of the land,” Garlinghouse stated in a post on X.