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Pro-XRP lawyer Fred Rispoli outlined Ripple’s strategy for its ongoing legal battle with the U.S. Securities and Exchange Commission (SEC). He hinted at the potential significance of certain securities laws to be a critical component in Ripple’s cross-appeal. Moreover, CEO Brad Garlinghouse doubled down on XRP’s non-security status, relieving community concern.
What Will Ripple’s Masterstroke Be in Cross-Appeal?
Rispoli’s revelation came after the SEC confirmed it would appeal a federal judge’s ruling in its case against Ripple. On October 2, the SEC filed a notice of appeal to the Second Circuit Court of Appeals, marking the next chapter in its four-year legal battle with the blockchain company. The case stems from the SEC’s claim that Ripple’s XRP token sales violated federal securities laws.
Fred Rispoli, known for his strong pro-XRP stance, laid out a detailed timeline for the legal proceedings but more importantly shed light on Ripple’s counter-appeal strategy. He emphasized that the company would likely invoke blue sky laws, state-level securities laws that protect investors from fraudulent practices and unregistered securities sales.
Ripple will make that argument in its cross-appeal.
— Fred Rispoli (@freddyriz) October 3, 2024
When asked how these laws would play into the blockchain firm’s defense, Rispoli simply stated, “Ripple will make that argument in its cross-appeal.” For context, blue sky laws, named after the idea that some speculative investment schemes have no more substance than “blue sky.”
These laws impose stringent requirements on securities offerings within individual states. Moreover, blue sky laws mandate the registration of securities, regulate brokers and dealers, and license investment professionals. More critically, they are designed to protect investors from fraudulent sales tactics and worthless speculative investments.
Rispoli’s hint that blue sky laws would feature prominently in Ripple’s cross-appeal adds an intriguing dimension to the case. While federal securities laws, enforced by the SEC, have been the primary battleground, the introduction of state-level regulations could complicate the SEC’s arguments.
Blue sky laws vary across states, and invoking them could provide Ripple with additional legal leverage. This comes in handy particularly, if they argue that XRP’s sales did not violate state-level securities regulations.
SEC Appeal Details
Currently, the SEC is trying to overturn a significant part of the July 2023 ruling by Judge Analisa Torres. In that ruling, the judge found that while Ripple’s institutional sales of XRP violated federal securities laws, its programmatic sales to retail investors did not.
The SEC’s attempt to file an interlocutory appeal against this decision was denied. Despite this setback, the federal regulator is pushing forward with its appeal to the Second Circuit, aiming to challenge the court’s interpretation of securities laws in the case.
In its official statement, the SEC spokesperson maintained that Judge Torres’ decision conflicted with “decades of Supreme Court precedent and securities laws,” according to a CoinDesk report. They also expressed confidence in its upcoming appeal.
However, Ripple appears equally resolute in its defense. Garlinghouse, responding to the SEC’s notice of appeal, was vocal in his criticism. Writing on X, Garlinghouse stated:
“If Gensler and the SEC were rational, they would have moved on from this case long ago. It certainly hasn’t protected investors and instead has damaged the credibility and reputation of the SEC.”
Garlinghouse further asserted that the SEC had “lost on everything that matters.” Moreover, he reiterated the firm’s view that XRP’s status as a non-security was now established legal precedent. He also noted that the SEC’s previous attempt to file an interlocutory appeal, which was unsuccessful, signaled that they had “no intention of challenging XRP’s status as a non-security.”