Awaiting Verdict: XRP’s Ripple Expects Long SEC Appeal Battle

• The Ripple verdict could remain unchanged even in the event of an SEC appeal, projects John Deaton, a crypto attorney representing over 75,000 XRP holders.
• A court decision on the SEC’s appeal could take approximately two years, throughout which Judge Analisa Torres’ ruling remains valid in the 2nd Circuit.

In the highly dynamic world of cryptocurrency regulations, the recent Ripple verdict has sparked a blend of optimism and apprehension within the crypto industry. Earlier this week, the U.S. Securities and Exchange Commission (SEC) articulated their plans to contest part of the judgment, a move they justified by labeling the decision as “incorrectly ruled.”

XRP attorney Deaton said the SEC’s appeal against XRP would not be a major setback for Ripple. Even on appeal, it will take two years for a second-level court to reach a decision. In the interim, Judge Torres' ruling will remain in effect. https://t.co/1bEsu2pcc3 https://t.co/m5xH8ZvCoe

— Wu Blockchain (@WuBlockchain) July 23, 2023

An Unwavering Ripple Amidst SEC’s Potential Appeal

The SEC’s displeasure stems from the section of the Ripple ruling that pertains to the retail selling of XRP on crypto exchanges. According to the ruling, the retail sale of XRP doesn’t equate to securities sales. However, the SEC has expressed intentions to challenge this ruling.

Nevertheless, Deaton expressed via Twitter that even if the SEC proceeds with the appeal, a court decision could potentially take around two years. During this period, Judge Analisa Torres’ Ripple ruling remains the controlling law within the 2nd Circuit.

An appeal is not even close to be a setback. First, it will be two years from now before a decision is issued by the 2nd Circuit, if it’s appealed. The Torres Decision is the law until then – at least in the 2nd Circuit. Second, even if the 2nd Circuit said Torres was wrong… https://t.co/GzW31D9edQ

— John E Deaton (@JohnEDeaton1) July 22, 2023

Deaton suggests that even amidst the SEC’s appeal, Ripple might emerge victorious in court yet again. In Deaton’s assessment, even if the 2nd Circuit disagreed with Judge Torres’ application of the third aspect of the Howey Test, it doesn’t promise a triumph for the SEC.

The Howey Test is a four-pronged examination, comprising (1) investment of money, (2) in a common enterprise, (3) expectation of profit, (4) stemming from the efforts of others. Any asset satisfying all these criteria is deemed a security, thus falling under federal securities laws.

Judge Torres’ ruling deemed that the retail sale of XRP didn’t satisfy the third criterion of the Howey test, as retail investors lacked a reasonable expectation of profit tied to Ripple’s success.

In the event the 2nd Circuit deemed Judge Torres’ application of the third Howey Test prong as “incorrect,” Deaton proposes that she could reassess the remaining two factors. Subsequently, she could deliver an identical ruling as before, assuming the SEC failed to fulfill the common enterprise criterion.

It’s worth noting that the Torres Decision’s authority doesn’t extend beyond the Southern District of New York (SDNY). While a fellow District Judge within the SDNY could disagree with Judge Torres, Deaton contends such discord is less probable within the 2nd Circuit, especially given her citation of Judge Castel’s verdict in the Telegram case.

Drawing from the Coinbase transcript, Deaton underlines a budding consensus within the 2nd Circuit, hinting at a potential alignment with Judge Torres’ perspective.

Ripple’s CEO, Brad Garlinghouse, expressed his dissatisfaction with the SEC’s approach, stating they’ve created a “mess” by assuming authority over cryptocurrencies without legal jurisdiction. Concurrently, Ripple’s Chief Legal Officer, Stuart Alderoty, described the SEC’s assertion of jurisdiction over crypto as a “political power play” causing universal harm.

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