What Happens If SEC Appeals Ripple (XRP) Ruling?

YEREVAN (CoinChapter.com) — The recent ruling by Judge Analisa Torres in favor of Ripple Labs has sent ripples throughout the cryptocurrency industry, leaving the Securities and Exchange Commission (SEC) at a critical crossroads. With Judge Torres denying the SEC’s request for disgorgement and limiting Ripple’s liability to a civil penalty, the agency now faces a crucial decision: should it appeal the ruling? The outcome of such an appeal could have far-reaching implications for both the SEC and the broader crypto landscape.

Ripple Appeal Raises Questions on Interest and Legal Complexities

Fred Rispoli, a prominent attorney in the crypto space, recently raised a crucial question on X: If the SEC appeals and Ripple wins on all counts, would the SEC need to pay statutory interest on the $125 million penalty, in addition to returning it?

James Farrell, another legal expert, provided insights into the complexities that could arise if the case advances to the Second Circuit Court of Appeals. He noted that if the Second Circuit remands the case for a new trial due to unresolved factual issues, the litigation could become more intricate.

Farrell also emphasized that any appeal would likely involve a cross-appeal by Ripple. If Ripple does not pursue a cross-appeal, it implicitly accepts the $125 million penalty, restricting the appellate court’s scope in addressing other issues.

Ripple Could Add Costly Interest and Bond Expenses for SEC

The financial implications of an appeal are significant. Should Ripple prevail, the SEC might not only have to return the $125 million but also potentially pay statutory interest, which could increase the financial burden on the agency.

Farrell further explained that Ripple would likely seek to stay the payment of the judgment pending the appeal, possibly securing it with a bond. If the SEC loses, it might be required to cover the bond’s cost as part of the appeal expenses under the Federal Rules of Appellate Procedure 39, subject to the Second Circuit’s discretion.

SEC Appeal Risks Undermining Crypto Regulation After Ripple Ruling

An appeal by the SEC would not only prolong the litigation but also cast further doubt on the agency’s ability to regulate the cryptocurrency industry effectively. Judge Torres’s ruling has already dealt a blow to the SEC’s strategy of seeking large disgorgement penalties in cases based solely on registration violations. The denial of disgorgement in the Ripple (XRP) case, based on the lack of identifiable victims who suffered financial harm, sets a precedent that could limit the SEC’s ability to pursue similar penalties in future cases.