SEC files appeal after court ruling in Ripple case

After the court ruled in favor of Ripple in its lawsuit against the U.S. Securities and Exchange Commission (SEC), the agency filed new documents in its lawsuit against Terraform Labs and its CEO Do Kwon on Friday evening, claiming that the Ripple decision is flawed and can be appealed.

According to a new set of documents submitted in the Terraform Labs case, the SEC is now hinting at an appeal against the Ripple ruling, in which the court determined that the company did not violate securities laws by offering its native token XRP to retail investors, but did violate the law when it comes to institutional investors.

The SEC’s decision is a response to a filing by Terraform Labs’ attorneys earlier last week, who stated that the Ripple ruling strengthens their defense and supports their motion to dismiss the lawsuit.

At the heart of the controversy is the Howey test, a legal test that determines whether a financial instrument constitutes an investment contract and thus falls under the SEC’s regulatory jurisdiction.

– Contrary to Ripple’s claims, a large part of the ruling supports the SEC’s claims in this case – the documents state, adding that Ripple’s practice is contrary to the Howey test.

The filings against Terraform and Do Kwon from Friday show that the SEC believes the judge in the Ripple case should overturn its recent rulings related to the sale of XRP, arguing that the company creates an artificial distinction between the expectations of sophisticated institutional and retail investors. If that distinction holds, according to the SEC, it overturns the Howey test.

– The court must draw reasonable conclusions in favor of the SEC, including that institutional buyers in this case, such as corporations that purchased crypto assets without resale restrictions, bought because they considered the asset an investment opportunity – claims the SEC.

Terraform Labs and CEO Do Kwon have been in a legal battle with the SEC since the beginning of this year, after the company collapsed. The lawsuit is damning, after the terra stablecoin UST lost its peg and took with it $40 billion in funds from retail and institutional investors.