Attorneys Kristi Warner and James Murphy (@Metalawman) discussed the SEC’s appeal on the Crypto Law channel. In the Ripple case, Judge Torres ruled that only institutional sales were unregistered securities. She made it clear that XRP itself is not a security, and sales between retail holders that didn’t involve Ripple are also not securities.

He said that the SEC was especially upset about the ruling that XRP is not a security, which is why they tried to appeal during the case. It wasn’t surprising when they filed a notice of appeal last week, which starts the next steps in the process. Now that the SEC has filed their appeal, they will need to fill out several forms as things move forward.

Overview of the Appeal Process

James explained that the situation with Ripple isn’t typical, and we are following the standard appeal process. When a notice of intent to appeal is filed, the appellant has 14 days to complete a specific form. This form must include details about the lawyers involved, the nature of the appeal, and the specific issues being contested. We should expect to see this form within 14 days of the notice of appeal filed last week.

Key Issues in the Appeal

There are two major issues likely to arise in the appeal. The first concerns whether the trades on the secondary market initiated by Ripple or its executives are considered investment contracts. Judge Torres ruled that they are not, while the SEC disagrees.

The second issue revolves around the lack of a disgorgement award, which means returning profits gained from wrongdoing. The Second Circuit Court of Appeals previously determined that for disgorgement to be granted, there must be identifiable victims who have suffered financial losses. The SEC failed to present any such victims, which is surprising after four years of litigation.

Complex Legal Issues

In reality, the retail XRP holders seem to be the ones adversely affected by the SEC’s actions, while large institutions did not suffer any harm. He then said that there’s a more complex aspect regarding the disgorgement issue. A panel of three judges from the Second Circuit ruled in a case known as Govil that disgorgement cannot occur unless the victims of securities violations have experienced financial losses. This ruling places them at odds with the Fifth Circuit Court of Appeals.

This is where XRP supporters might feel frustrated, as it’s likely they could face another setback. If that occurs, the SEC’s only remaining option may be to escalate the issue to the United States Supreme Court concerning the disgorgement matter.

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