Latest Updates on Ripple Labs and SEC Developments 📈
In a significant development, the U.S. Securities and Exchange Commission (SEC) filed an appeal with the District Court for the Southern District of New York, challenging the recent ruling in its case against Ripple Labs. This appeal unfolds amidst the resignation of Gurbir Grewal, who formerly held the position of enforcement director at the SEC. Following a court ruling on August 7, 2024, Judge Analisa Torres determined that Ripple would need to pay a $125 million penalty for allegedly selling XRP, its native cryptocurrency, to institutional investors without proper registration, a classification the court had established in a prior decision.
Additional Insights on XRP 🚀
Judge Torres clarified in her August ruling that sales of XRP tokens to retail investors in secondary markets do not qualify as securities. The SEC has expressed dissatisfaction with her ruling regarding Ripple Labs and its executives, including CEO Brad Garlinghouse and co-founder Christian Larsen. The recent appeal by the SEC seeks to overturn this court decision.
Prior to this appeal, an ex-SEC attorney suggested that the SEC was likely to pursue an appeal, noting that many within the organization felt the judgment contained flaws and warranted a higher court’s examination.
The appeal is set to be addressed by the U.S. Court of Appeals for the Second Circuit. In light of the SEC’s actions, Ripple’s Chief Legal Officer, Stuart Alderoty, conveyed disappointment but no surprise regarding the SEC’s move, characterizing it as a prolongation of an embarrassing scenario for the regulatory agency.
Ripple is contemplating a cross-appeal, as Alderoty stated, and they remain optimistic about their prospects in court. This cross-appeal would aim to overturn the ruling that identified XRP sales to institutional investors as securities, along with contesting the $125 million fine. Regardless of the outcome, this year’s ongoing legal conflict between the SEC and Ripple is anticipated to persist.
Alderoty also indicated the potential for internal transitions within the SEC, particularly since the agency’s appeal coincided with Grewal’s departure from the enforcement role.
Suspension of XRP ETF Proposal 🛑
The SEC’s appeal is released shortly after Bitwise Asset Management submitted an S-1 registration statement to launch a spot XRP ETF. This initiative is designed to offer investors exposure to XRP. In the filing disclosed on Wednesday, Bitwise named BNY as the trust’s administrator while listing Coinbase Custody Trust Company, LLC as the custodian. The firm also asserted that XRP does not classify as a security, countering the SEC’s previous assertions.
Due to the SEC’s appeal regarding Ripple’s court decision, Bitwise’s application is now suspended, owing to the uncertain legal status of XRP. The chances for approval remain speculative even before this appeal. Analysts suggest Bitwise may be strategically timing their move with the upcoming U.S. presidential election in November, yet skepticism about near-term approvals persists, particularly in light of the SEC’s intention to contest the ruling.
Bitwise acknowledged the possibility of the SEC’s appeal in its ETF filing, stating: “If XRP is found by a court or other regulatory body to be a security, the Trust could be considered an unregistered ‘investment company’ under the Investment Company Act of 1940, which could necessitate the Trust’s liquidation under the terms of the Trust Agreement.”
In a related development, Grayscale introduced a trust product for XRP recently. Experts believe that this could establish a pathway for a future conversion from a trust model to an ETF, akin to Grayscale’s previous transitions with its Bitcoin and Ethereum Trusts.
The SEC’s appeal has notably affected XRP’s market performance, leading to a 9% drop in price, bringing it down to approximately $0.54, according to CoinGecko. This comes after XRP previously surged past the $0.60 mark following Bitwise’s indication of its impending ETF filing.
Hot Take on the Ripple Situation 🔥
The ongoing battle between Ripple Labs and the SEC is a significant focal point within the cryptocurrency and regulatory landscape. With the recent appeal, the future of XRP and related investment vehicles remains in limbo. Investors and stakeholders alike are keenly observing how this year’s legal fracas unfolds, as well as its implications for similar cryptocurrencies. The evolving situation will be pivotal in shaping both regulatory approaches and market reactions in the future.