Ripple Challenges Judge Torres’ Application of Howey Test on Institutional XRP Sales in Appeal

Ripple just filed its Form C (Civil Appeal Pre-Argument Statement). It wants the Court of Appeals to review whether the District Court appropriately applied the Howey test when evaluating its XRP sales.

This filing suggests that Ripple intends to contest Judge Torres' application of the Howet test on XRP sales to institutional clients.

Ripple Files Its Appeal Form C

Ripple has moved forward in its counter-appeal against the US SEC, continuing their long-running legal battle over XRP's regulatory status.The company submitted its civil appeal pre-argument statement, Form C.

#XRPCommunity #SECGov v. #Ripple #XRP @Ripple has filed the Civil Appeal Pre-Argument Statement (Form C). The relevant pages are below. pic.twitter.com/usm3fCjG20

- James K. Filan (@FilanLaw) October 25, 2024

This document outlines the areas in which Ripple wishes to challenge the District Court's ruling.

In its latest filing, Ripple requested a de novo standard of review. This means the Court of Appeals will treat the issue like a fresh case without referencing the previous court's (the New York District Court) decision.

Ripple wants the appeals court to re-examine how the Howey test was applied in the previous judgment.

One of the key arguments in the appeal is how the district court applied the Howey test on Ripple XRP sales. Recall that the SEC argued that Ripple's XRP sales constitute investment contracts because investors harbor reasonable expectations of profit based on Ripple's efforts.

In July last year, US District Judge Analisa Torres ruled that Ripple's XRP institutional sales constitute investment contracts while its programmatic distributions don't.

Another key aspect of the appeal is the district court considered Ripple's lack of fair notice when making its decision. Previously, Ripple argued that it did not deliberately violate securities law since it received no fair notice from the SEC before conducting the XRP sales.

Additionally, Ripple wants to reevaluate the requirements for classifying a transaction as an investment contract. The cross-appeal statement also requested that the Court of Appeals reassess the purview of the SEC's injunction against Ripple.

Ripple and SEC Battle Continues

In an X post, Ripple's CLO Stuart Alderoty commented on the Form C filing and shared a brief insight about the case. He is optimistic that the appeal proceedings will be smooth and the potential outcome positive.

Today, Ripple filed a Form C - listing the issues we plan to raise on our cross appeal. A few things to keep in mind as we move forward:

The case is not about whether XRP, in and of itself, is a security. XRP is uniquely situated as having clarity (alongside BTC) in not being... https://t.co/AmFocAnbPx

- Stuart Alderoty (@s_alderoty) October 25, 2024

He wrote, The Appeals Court reviews the record that has already been set...and we have a great record. The SEC can't submit new evidence or ask us to produce more. (Meaning, there won't be all the drama we had in the litigation when we fought over documents.)"

Furthermore, Alderoty emphasized that XRP's non-security status is clear and established. He said the previous ruling stands, and the SEC isn't challenging it.

Meanwhile, Ripple filed its Form C a week after the SEC submitted its pre-argument statement. The SEC filed its Form C on October 17, a day after the due date, October 16.

The commission requested that the Appeals Court re-examine whether the New York District Court committed an error in its judgment. It wants to know whether the district court's decision regarding Ripples XRP offerings and sales on trading platforms is correct.

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