SEC Hints at Challenging Court XRP Ruling in Separate Lawsuit

The SEC may appeal the recent court ruling in its case against Ripple Labs, asserting that the decision conflicts with fundamental securities laws principles, including the Howey test.

The U.S. Securities and Exchange Commission (SEC) has given its response to the recent court decision in its case against Ripple Labs, arguing that XRP isn’t a security when sold to retail investors.

The Ripple comments were made in a separate filing in the SECs ongoing lawsuit against Terraform Labs and its founder, Do Kwon, for an alleged multi-billion-dollar crypto asset securities fraud.

According to the SEC, the verdict contradicts fundamental securities laws principles, such as the Howey test, a set of criteria that determine the nature of an investment contract:

Terraform Labs’ attempt to dismiss the lawsuit cited the Ripple Labs ruling as a possible precedent. The SEC replied, however, expressing its disagreements with the decision on XRP and to dismiss its case against Kwon.

“Ripple erroneously creates two different ‘reasonable investor’ standards—one for institutional and another for retail investors—but creating any such subjective dichotomy is contrary to Howey,” the SEC stated. The Commission further contended that the Ripple used “‘generally less sophisticated’ investors” to cast a subjective view on XRP as a security.

These declarations surface soon after SEC Chair, Gary Gensler, admitted his disappointment about the court’s ruling that XRP is not a security when sold to retail investors in a recent interview with Yahoo Finance:

“And while we’re disappointed on what they said about retail investors, we’re still looking at it, and assessing that.”