Ripple vs SEC: ‘Victory,’ or another chapter in the legal battle?

While Ripple celebrates the conclusion of its four-year legal battle with the United States Securities and Exchange Commission (SEC), some lawyers have raised doubts about whether the recent court developments truly constitute a victory.

Ripple, the company behind the XRP (XRP) cryptocurrency and a currency exchange network, celebrated the end of its four-year legal battle with the United States Securities and Exchange Commission on Aug. 7.

Announcing the news on X, Ripple CEO Brad Garlinghouse argued that US District Judge Analisa Torres gave a 94% reduction from the SEC’s initial plan to fine Ripple $2 billion in damages.

“This is a victory for Ripple, the industry and the rule of law. The SEC’s headwinds against the whole of the XRP community are gone,” the CEO wrote.

The community quickly reacted to the news, with XRP surging 26% after Garlinghouse’s announcement.

While many lawyers have called the latest court decision a “major win” for Ripple, some are hesitant to label it a complete victory. Others have even suggested that it might not mark the end of the legal battle.

"Ripple is a winner, but it doesn’t feel like a win"

While the court decision to reduce the SEC’s remedies request from $2 billion to $125 million is “definitely not a win for the SEC,” it’s still hard to say that there are any winners in the case, according to Philip Moustakis, a lawyer at Seward & Kissel and a former SEC counsel.

That is because of the ongoing lack of clarity regarding how US securities laws should apply to cryptocurrencies, the costs of legal defense plus the fine and the disruption of Ripple’s business since the case’s initiation in late 2020.

According to a report on the legal news service Law360, Moustakis stated the following:

“Ripple is a winner, but I think in the grand scheme of things, if you have to be embroiled in litigation for years, have your asset, your token, be delisted from exchanges at least for some period of time, fight with a regulator, pay a large fine — that doesn't feel like a win.”

Apart from the high costs of Ripple’s “victory,” there are also chances that the SEC might challenge certain aspects of the case.

SEC has until early October to file an appeal

Following the latest decision by Judge Torres, the SEC was given 60 days to file an appeal in the Ripple case before the final decision of the court.

“Today starts the 60 countdown to the deadline to file an appeal,” XRP-supporting lawyer Fred Rispol wrote on X on Aug. 7.

According to Fox Business journalist Eleanor Terrett, the potential appeal by the SEC will likely be related to other court rulings instead of the most recent remedies ruling.

Should the SEC file an appeal by Oct. 6, it will likely relate to Torres’ July 2023 court decision, which ruled that XRP was not a security only concerning programmatic sales to retail investors. At the same time, Torres ruled that XRP was still a security when sold to institutional investors. Concluding her communication with the SEC and Ripple, Terrett stated:

“I feel an appeal of the remedies ruling from either side is unlikely. I think it’s more likely that the SEC would appeal the July 2023 ruling now that final judgment has been reached.”

“They have the right to appeal. And if they do, the focus will be on the programmatic sales for sure,” attorney Jeremy Hogan noted.

According to Joe Castelluccio, a partner at Mayer Brown, the SEC is likely to appeal, given that the agency had already tried and failed one in October 2023. The lawyer believes the SEC might likely appeal on secondary sales and the penalty.

Additionally, the SEC didn’t explicitly say that sales on Ripple’s cross-border payments service, on-demand liquidity (ODL), violate the law. Instead, it argued that the sales showed a likelihood that Ripple could reoffend.

“As the court found, the fact that Ripple has shown a willingness to push the boundaries of the summary judgment order evinces a likelihood that it will eventually — if it has not already — cross the line,” the SEC reportedly said in a statement to Law360.

According to Withers partner Christopher LaVigne, that leaves room for future back-and-forth on the ODL sales. “Does it end litigation between the parties? I don’t know if it does,” he stated.