The US Securities and Exchange Commission (SEC) is reportedly asking a federal judge not to heed the recent landmark court ruling in favor of Ripple Labs and XRP.
According to a new report from Bloomberg, the SEC says the decision, which was a ruling that Ripple Lab’s automated, open-market sales of XRP do not count as securities transactions, violates existing securities laws.
The SEC’s move highlights the potential for the agency to appeal the ruling.
The ruling also stated that selling XRP to institutional investors violates securities laws, but selling the digital asset to retail investors directly through crypto exchanges did not. The SEC is asking the court to ignore the “artificial distinction” between retail and institutional investor expectations that the regulator said was created by the ruling.
The SEC adds that the ruling erroneously changes the Howey test, a method developed decades ago by the Supreme Court to determine whether an asset counts as security or not.
Last week, Ripple Labs CEO Brad Garlinghouse said the ruling has brought regulatory scrutiny as the enforcement actions have stifled innovation in the industry and called on lawmakers to create clear crypto guidelines.
The SEC first sued Ripple Labs in December 2020 for selling XRP as an unregistered security.
The favorable ruling had a significant impact on XRP, as it rose from $0.42 on July 3 to $0.82, roughly a 95% increase. The crypto asset has since been withdrawn and is trading at $0.74 at the time of writing.
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Featured image: Shutterstock/Tithi Luadthong