(Bitwise XRP ETF) The securities regulator’s filing of an SEC notice of appeal in the Ripple case has thrown plans to launch a Bitwise XRP EFT into complete disarray. The watchdog asserted the Judge erred in the August ruling during the SEC vs. Ripple lawsuit by ordering Ripple Labs when she ordered Ripple Labs to pay a paltry $1.25 million in civil penalties.
The last-minute decision by the US Securities and Exchange Commission (SEC) to file an SEC notice of appeal in the Ripple case a few days before the deadline could halt or delay plans for the recently proposed first-ever XRP ETF by asset manager Bitwise. Sharing details of the filing, SEC’s attorney James Filan said, “The Securities and Exchange Commission at this moment respectfully appeals to the United States Court of Appeals for the Second Circuit from the final judgment entered by this court on August 7, 2024.”
Court Misapplied Howey Test in SEC vs Ripple Case
In filing the SEC notice of appeal in the Ripple case, the regulator states that the final judgment in the SEC vs. Ripple and its directors, Brad Garlinghouse and Chris Larsen, the Judge, erred during the August 7, 2024 final settlement. The judgment gave a partial victory to the XRP token issuer even though the SEC still contests that Ripple’s distribution of XRP tokens was done in violation of federal securities laws.
In the appeal document, the watchdog’s legal team contends explicitly that the court didn’t correctly apply the Howey Test, an instrument used to determine whether an asset could be classified as an investment contract. The commission’s legal team considers the ruling a misapplication that could significantly undermine its regulatory authority when cryptocurrencies are involved.
Near Zero Chances
With the SEC notice of appeal in the Ripple case in place, there’s now every chance the saga could extend into 2025 and further place a cloud of uncertainty on the proposed Bitwise XRP ETF or other attendant financial products. The August judgment in the SEC vs Ripple’s long-drawn legal tussle had given Ripple Labs a favourable ruling, which saw XRP exempted from the list of securities.
While this was hailed all over the crypto community as a great win, the decision to file an appeal will halt the party, even as questions on the legal status of XRP are put to the test once again. The Galaxy Digital Head of Research, Alex Thorn, had previously indicated that the possibility of the Bitwise XRP ETF seeing the light would be “near zero” if the SEC filed this appeal.
Disappointing Though not Surprising
Following filing an appeal in the long-drawn SEC vs. Ripple legal battle, Ripple Lab’s legal advisor Stuart Alderoty stated that “the SEC’s decision to appeal was disappointing, though not surprising”, adding that the firm was likely to file a cross-appeal. Stating his frustrations, Alderoty further called the appeal by the SEC a “complete embarrassment” and disagreed with the regulator’s claims that Ripple Labs acted recklessly since there wasn’t any evidence of fraud victims, fraud or financial loss.
According to Alderoty, the securities watchdog is engaged in irrational and misguided litigation warfare, but the blockchain firm will once again prove its innocence in the appellate court. On Wednesday, Asset manager Bitwise took a bold step towards launching the first-ever Bitwise XRP ETF after submitting an S-1 form with the SEC. The Ripple-backed exchange-traded fund would join the already popular Bitcoin and Ether ETFs that have been popular with institutional players. News about the SEC notice of appeal in the Ripple case affected XRP adversely, with the token shedding off at least 9.78% in trading on Wednesday to close at $0.5388.
