US SEC cannot appeal Ripple Labs decision, judge rules

By Jonathan Stempel

NEW YORK (Reuters) – A federal judge on Tuesday refused to let the U.S. Securities and Exchange Commission appeal her recent decision involving Ripple Labs, a ruling that has been seen as a major defeat for the regulator in its effort to police cryptocurrency markets.

In her July 13 decision, U.S. District Judge Analisa Torres in Manhattan had ruled that the sale of Ripple’s XRP digital token on public exchanges complied with federal securities laws because purchasers had no reasonable expectation of profit based on Ripple’s efforts.

The SEC had sought permission to appeal Torres’ findings about “programmatic” sales of XRP and about “other distributions” of XRP as a means of payment for services, saying an appeal would be important to a “large number” of lawsuits.

But the judge found no “substantial ground for difference of opinion” about her findings, and did not agree that an appeal would materially advance the case toward a conclusion.

She also said her decision did not conflict with a July 31 ruling by U.S. District Judge Jed Rakoff in Manhattan, who said the SEC had a “plausible claim” that Terraform Labs’ Terra USD token was a security when sold on public exchanges.

Torres said Rakoff had been considering Terraform’s motion to dismiss the SEC case, and was required to accept all reasonable inferences in the regulator’s favor.

A trial in the Ripple case is scheduled for April 23, 2024.

The SEC did not immediately respond to requests for comment after market hours. Lawyers for Ripple, Chief Executive Brad Garlinghouse and co-founder Chris Larsen did not immediately respond to similar requests.

In its December 2020 lawsuit, the SEC accused Ripple of illegally raising more than $1.3 billion in an unregistered securities offering by selling XRP.

The SEC has long claimed that many digital assets are securities, as are stocks and bonds, and that it has power to regulate them.

Its other lawsuits include cases against Binance, the world’s largest cryptocurrency platform, and Coinbase, the largest U.S. cryptocurrency platform.

Torres had found in July that only some XRP sales violated federal securities laws.

The case is SEC v Ripple Labs Inc et al, U.S. District Court, Southern District of New York, No. 20-10832.

(Reporting by Jonathan Stempel and Jody Godoy in New York; Editing by Edwina Gibbs)