December 11, 2023

In a recent statement, the SEC claimed that the recent Ripple ruling was incorrect, while revealing that it has made its decision and is currently appealing it.

There is some intertwining background to the latest legal dispute with the US Securities and Exchange Commission (SEC), involving Terraform Labs and its co-founder Do Kwon.

Notably, the recent SEC motion against Terraform Labs has reignited the discussion around this milestone Ripple Labs caseindicating that an appeal may be imminent.

Institutions and Retail: Different Perspectives

inside Ripple Labs caseThe court ruled that Ripple violated SEC rules by selling XRP tokens to institutional investors. However, the judge ruled that Ripple’s products offered to retail investors on the exchange did not violate these regulations. This divergence between institutional and retail sales is widely seen as a victory for the cryptocurrency industry.

Contrary to this view, the United States Securities and Exchange Commission (SEC) recently filed a Terrain Lab And the right to object. The agency said:

“This decision artificially separates the expectations of sophisticated institutional and retail investors.”

The SEC argued that the ruling reformulated the decades-old Howey Test, an indicator used to identify when an asset is a security, turning it into a more subjective standard.

As such, the SEC asked the court to dismiss this part of Ripple’s ruling and hinted at a possible appeal of Ripple’s case.

Implications of Ripple Ruling on Terraform Labs Litigation

Ripple’s ruling has become an important reference in ongoing litigation Terrain Lab peace. Their legal representatives cited Ripple’s ruling in their motion to dismiss, saying it “demonstrates the legal inadequacy of the SEC’s argument.”

They were referring to the SEC’s assertion that certain tokens, including the ill-fated TerraUSD stablecoin, are securities due to the way they were sold.

However, the SEC doubled down on accusations that Terraform Labs and Kwon issues and sells unregistered securities At least $40 billion in market value lost as part of a fraudulent scheme. The SEC also highlighted that the institutional investor side of the Ripple ruling supports its case against Terraform Labs.

In this case, the SEC noted, institutional buyers (such as trading firms that purchased crypto assets from Terraform Labs with no resale restrictions) were buying ostensibly because the assets were investments on top of Terraform Lab’s plans.

Legal disputes involving the SEC, Ripple Labs, and now Terraform Labs underscore the changing dynamics between the nascent cryptocurrency industry and established securities regulation. The nuanced interpretation of these regulations related to cryptocurrencies like XRP and TerraUSD has had a profound impact on the industry. How these cases are heard in court will set a precedent that could shape the cryptocurrency landscape for years to come.

Future Appeals from the SEC

The SEC’s recent motion reveals its plans to challenge federal court rulings in its favor Ripple Labs. U.S. District Judge Analisa Torres upheld that Ripple’s nearly half of its XRP sales did not violate investor protection laws. The ruling offers hope to other defendants involved in disputes with the SEC over cryptocurrency sales, which, according to the SEC, generally constitute illegal sales of securities.

The court ruling serves as a beacon of hope for defendants such as Terraform Labs co-founder Do Kwon. Kwon, who is currently serving time in prison, faces an SEC lawsuit alleging fraudulent activity and various legal violations. The lawsuit was filed in Manhattan federal court in February. In light of Ripple Labs’ recent ruling, Kwon’s defense used it as a basis for rebutting the SEC’s allegations.

changing precedent

As SEC expresses intent to appeal Ripple Labs rulingA cloud of uncertainty hangs over the cryptocurrency industry. The final decision in the Ripple case could have a profound impact on ongoing and future litigation, including that of Terraform Labs.

Disclaimer: This article is for informational purposes only. It does not provide or be intended to be used as legal, tax, investment, financial or other advice.