The legal battle between Ripple and the US Securities and Exchange Commission (SEC) has been a focal point for the crypto community, and recent developments have only intensified the spotlight. The SEC’s request for a preliminary appeal has generated a whirlwind of analysis, with legal experts examining the potential findings and their broader implications. Drawing on the insights of attorneys James “MetaLawMan” Murphy, Brian Jakotot, and Bill Morgan, let’s break down the possible scenarios that could happen.
Scenario 1: Ripple opposes preliminary appeal
MetaLawMan Analysis She suggests That Ripple’s first choice is to oppose the request for certification on appeal. Underlying this position is Ripple’s unwavering confidence in the correctness of Judge Torres’ decision. By opposing the appeal, Ripple is citing its belief that the decision is fully consistent with the company’s legal position, especially the secondary market sales of XRP.
Murphy identifies three reasons why this scenario is the most likely: First, Ripple does not want to agree to the premise that there are “substantial reasons for difference of opinion” in Judge Torres’ ruling which is part of the legal standard for the validation of an interlocutory appeal.
Furthermore, there is a possibility, albeit slim, that Congress will enact an encryption law. Such legislation would redefine original institutional sales of XRP, characterizing them as non-securities transactions. This redefinition will hinge on the fact that institutional buyers have not received equity or legal rights to participate in Ripple’s profits in return for their money.
Third, there could be a change in management: looking to 2025, a new administration could offer a fresh perspective on the SEC’s approach to crypto enforcement. This could manifest either as an immediate dismissal of the case or a settlement on favorable terms for Ripple, according to Murphy.
Scenario 2: Ripple approves preliminary appeal
MetaLawMan also raises the possibility that Ripple has agreed with the SEC that a preliminary appeal might be appropriate. Such a step would be rooted in acknowledging the inevitability of appeal in this case. The pivotal question, then, becomes timing: Will the appeals process begin immediately, or will it be delayed until after Brad Garlinghouse and Chris Larsen’s trial?
Scenario 2a: Ripple seeks mutual appeal
Adding a layer of complexity, Ripple can choose to cross-appeal the institutional sales claim while agreeing to the preliminary appeal. The strategic logic here, as outlined by MetaLawMan, is that if the Second Circuit were to reverse the SEC’s victory on this claim, it would eliminate the need for the institutional sales aid and abet trial.
Attorney Bill Morgan, too Zeros In a pivotal aspect of Judge Torres’ decision regarding sales to on-demand liquidity (ODL) clients. He confirms the magnitude of this decision, noting that all of Ripple’s sales after June 2020 were to ODL customers, which amounted to $3 billion after the complaint. Given the financial implications and the SEC’s intention to target this amount, Morgan firmly believes that Ripple should consider appealing this part of Judge Torres’ decision.
Scenario 3: One more step
Brian Jacotot, partner at the Election Law Group, He paints Attention to the Terraform Labs case, which could significantly influence Judge Torres’ decision. Jacoutot points out that the SEC’s citation for the Terraform case is particularly noteworthy. In this case, the judge “dismissed” part of Judge Torres’ analysis, specifically her distinction between institutional sales and “machine sales.” This rejection is not just a simple disagreement. It is challenging the basis of Judge Torres’ ruling in the Ripple case.
Given this in-ring dispute between the XRP decision and the Terraform decision, Jacoutot believes the current case is a prime candidate for preliminary appeal. If Judge Torres grants the SEC’s request, the way will be cleared for the Second Circuit Court of Appeals to hear this pivotal matter.
Furthermore, Jacquot stresses the potential simplification of the appeals process if the interlocutory appeal is granted. This would mean a more rapid and definitive judgment as to whether Howey’s “blind supply/demand” theory of Torres’ novel stands up to scrutiny.
At the time of writing, XRP price is in a sideways trend, as it is trading at $0.6344.
Featured image from iStock, chart from TradingView.com