The SEC is hinting at the possibility of appealing the XRP ruling from the Ripple Labs lawsuit

The US Securities and Exchange Commission has suggested that it may appeal a recent ruling in the Ripple Labs lawsuit, which deemed XRP not a security when it was sold to retail investors.

The SEC argues that the ruling goes against “fundamental principles of securities laws” such as the Howey test, which determines what falls under the category of an investment contract or not.

Do we really want a judge to ask herself: Will my rigorous application of the Howey test in this case lead to a result in 2023 consistent with the policy implications behind the 1934 law? https://t.co/acMNRc00B6

– John E. Deaton (@JohnEDeaton1) July 22, 2023

The SEC’s recent comments regarding Ripple Labs’ lawsuit were made in a separate lawsuit against Terraform Labs and its founder, Do Kwon, over allegations of “orchestrating a multibillion-dollar securities fraud with crypto assets.”

According to the SEC’s July 21 response to Terraform Labs’ denial motion — in which the defendants cited a potentially ex-ruling by Ripple Labs — the SEC highlighted a set of cases it holds against the court’s recent decision regarding XRP.

“Contrary to Defendants’ assertions, much of the Ripple ruling supports the SEC’s allegations in this case and rejects the arguments raised here by Defendants. However, with respect to cryptocurrency and other sales, the SEC respectfully finds that Ripple contradicts and makes unsubstantiated claims against Howey and its descendants,” the SEC stated, adding the following:

“Respectfully, parts of Ripple were wrongly decided, and the court should not pursue them. SEC staff are considering the various avenues available for further review and intend to recommend that the SEC seek such a review.”

Related: XRP price is looking for a fresh bullish catalyst to trigger a move above $1

The SEC’s remarks come just days after SEC Chairman Gary Gensler expressed disappointment about the court’s finding that XRP is not a security when it is sold to retail investors.

“We are glad the court directed the order […] That a token for institutional investors is a security […] Disappointed in the other side regarding retail investors. “We’re still looking at that and thinking about it,” Gensler stated in an interview with Yahoo Finance on July 17.

On the same day, Gensler also appeared at the National Press Club to give a lecture on artificial intelligence, and was questioned if the court’s rulings represented an urgent need for clear regulation for the industry.

However, Gensler fails to provide a definitive answer to such.

The SEC argues that the court did not follow Howey rich… On its website, the SEC acknowledges that federal courts require commonality, then goes on to say that it does not require commonality in its analysis or view commonality as a distinct part of Howey. If the SEC… https://t.co/CX6Kwfh3cJ

– exlawyer.eth/tez (@exlawyernft) July 22, 2023

magazine: Crypto Regulation – Does SEC Chairman Gary Gensler Have the Final Word?