The case of the SEC accusing Ripple of selling its XRP crypto as an unregistered security is not over yet.
Indeed, although there is already a court ruling that XRP is not to be considered a security when it is traded on secondary markets (such as exchanges), the SEC could appeal to ask for a new ruling.
The agency has made it known that it is considering whether to appeal that ruling, and Chairman Gary Gensler said he was displeased with that outcome.
Although it is not yet certain that the SEC wants to proceed in this way, as of today it is by no means possible to rule out that the agency will proceed with the appeal. However, the fact that more than a week has already passed without the appeal being filed suggests that the possibility of the SEC giving up cannot be ruled out either.
Summary
SEC: the possible consequences on the XRP (Ripple) crypto
Clearly, in theory the eventual appeal could also yield the exact same outcome.
But even just the same appeal could have consequences.
It is probably no coincidence that after jumping first to $0.82 and then to $0.84 after the publication of the ruling, the price of XRP subsequently fell to just over $0.70.
It is worth noting that after the sudden jump on 13 July, the price had fallen just below $0.70 the following day, only to resume rising again from 16 July. Since 20 July, it has been in a slight retracement.
This retracement was probably triggered precisely by the news of the possible SEC appeal, and should the appeal be upheld it is possible to imagine a further decline.
However, far worse consequences could result should the SEC appeal and win, although to date this does not seem a particularly likely scenario.
The lawyer’s assumptions
Pro-XRP lawyer John Deaton has commented on this issue.
According to Deaton even if the SEC decides to appeal this would not be a setback for XRP.
Deaton points out that it will take two years before a further ruling, and until then the ruling already issued has legal force.
He also argues that it is unlikely that any appeal ruling would overturn the decision on whether XRP in the secondary market can be considered a security.
He cites the Howey test, which in theory should not yield different outcomes if redone.
However, he also points out that, theoretically, another judge might have a different interpretation, although according to Deaton any judge might have a hard time disagreeing with Judge Torres who issued the pro-XRP ruling.
For now, the crypto markets seem to be acting as if they share this reasoning, not least because Judge Torres actually faulted the company Ripple, which initially sold its cryptocurrency tokens on the primary market as if they were unregistered securities.
Indeed, it seems objectively difficult that this distinction could simply be erased by another judge, although in theory a looser interpretation of the Howey test could lead to XRP being considered an unregistered security even when it is traded on the secondary market by buyers and sellers who have nothing to do with Ripple.
The SEC’s defeat
Although Judge Torres agreed with the SEC regarding the charges against Ripple, the agency would have liked it to extend the reasoning to XRP exchanges that do not involve it.
But since it is not possible to charge people who have not committed crimes, those who sell XRP on secondary markets cannot under any circumstances be compared to Ripple, if only for the fact that many of those are selling XRP that they have previously purchased, while Ripple sold them after creating them out of thin air.
The SEC would have wanted equal treatment, but in light of this it would seem really absurd to compare those who buy and sell XRP in the market with Ripple who created them from scratch and then sold them.
What’s more, the SEC hoped that the reasoning later could be extended to many other cryptocurrencies, so Judge Torres’ ruling marks a big defeat for the agency, despite the fact that it partially agreed with it.
Maybe the SEC asked for too much, or maybe it imagined that the judge would not go so far as to cut to the heart of the matter and lump everything together. Instead, Judge Torres delved into the issue and also examined important details, such as the creation of tokens, and came to the conclusion that primary market exchanges and secondary market exchanges are different in nature.
For instance, in the ruling he wrote that those who bought XRP from Ripple, when the name of the cryptocurrency was still Ripple, were in fact financing the company that created it, while those who buy them from others on the secondary market are in no way financing Ripple.
This detail seems irrefutable, and indeed it seems unlikely that another judge would ignore or overturn it.
