SEC urges court to grant Ripple Labs appeal citing ‘knotty legal problems’

The U.S. Securities and Exchange Commission (SEC) has filed a motion urging the court to allow its appeal of a ruling in the Ripple Labs lawsuit. The ruling determined that XRP was not a security when sold to retail investors. The SEC argues that there are “knotty legal problems” surrounding the court’s application of the law, specifically the Howey Test, that should be reviewed.

Judge Analisa Torres previously ruled that XRP is generally not a security under SEC guidelines, especially when distributed through programmatic sales. The SEC’s latest filing argues that the rulings on programmatic sales and other distributions raise legal questions that justify an interlocutory appeal.

While this stance seems to contradict previous statements from the SEC and its chairman Gary Gensler, who has asserted that the SEC already has clear guidelines for the crypto market, the SEC believes that there is a legal gray area in determining whether certain crypto assets fall under the classification of investment contracts.

Ripple’s chief legal officer Stuart Alderoty criticized the SEC’s filing as “hypocritical,” highlighting the agency’s previous emphasis on the importance of adhering to clear rules. Coinbase’s chief legal officer Paul Grewal also questioned how crypto firms can be on “fair notice” if there are unresolved legal questions involved.

The SEC initially sought to appeal and stay the decision from Judge Torres in August, arguing that there were substantial differences of opinion. Ripple Labs responded by filing a memorandum of law in opposition, stating that the SEC lacked grounds for an appeal.