Fox Business journalist Charles Gasparino speculates that the appellate court could reverse Ripple’s victory against SEC following the rejection of Judge Torres’ ruling by the judge in the Coinbase case.
The recent court decision in the SEC v. Coinbase lawsuit has increased the uncertainties regarding the regulatory agency’s legal tussle against Ripple Labs.
Judge Failla Sides With SEC, Rejected Coinbase Argument
Recall that in an attempt to dismiss the SEC lawsuit, leading San Francisco-based exchange Coinbase cited the Ripple verdict, specifically the decision on programmatic sales of XRP on digital exchanges.
For the uninitiated, a part of the verdict in the Ripple case held that XRP sold on digital exchanges does not qualify as investment contracts because they were executed through blind bid/ask transactions.
However, on Wednesday, March 27, U.S. District Judge Katherine Polk Failla rejected this argument, essentially siding with the SEC.
Higher Courts Might Reverse Ripple Victory
Interestingly, the SEC’s recent victory over Coinbase at this early stage of the lawsuit elicited a reaction from Charles Gasparino, a senior correspondent at Fox Business.
Citing anonymous securities lawyers who he says have commented on the matter, Gasparino suggests Failla’s decision serves as a warning to XRP holders, claiming that a higher court could reverse Ripple’s victory.
BREAKING: Securities lawyers say a Fed judge’s ruling against @coinbase should be a warning to $XRP holders that judge Torres’s @Ripple analysis is likely to be reversed by the federal courts. The reason: Judge Failla rejected @coinbase’s contention that Torres’s @Ripple ruling…
— Charles Gasparino (@CGasparino) March 30, 2024
Gasparino noted that while Judge Failla rejected Ripple’s decision, she relied on Judge Jed Rakoff’s reasoning in the SEC case against TerraForm Labs. Like Failla, Judge Rakoff also rejected Judge Torres’ reasoning regarding Ripple’s programmatic sales of XRP.
Before now, Gasparino had continued to speculate that the appellate court would overturn Ripple’s win against the SEC, claiming Judge Torres’ decision suggests that XRP is a security and non-security at the same time.
A Bad Take
Since Judge Failla issued the Coinbase decision, there have been a series of debates regarding whether the Second Circuit would overturn the Ripple decision.
Expectedly, top industry commentators have dismissed Gasparino’s opinion on the Coinbase decision and its significance to the Ripple lawsuit. In particular, Seedstarter founder Jesse Hynes characterized Gasparino’s opinion as a “bad take.”
Hyness criticized Gasparino’s reasoning, emphasizing that no real lawyer would apply a ruling issued on a motion to dismiss, like the one filed by Coinbase, to a summary judgment decision given in the Ripple case.
For context, the SEC vs. Coinbase case is just entering the discovery phase, and the judge’s final decision on the case is yet to come up. Interestingly, Australian-based pro-XRP lawyer Bill Morgan also described Gasparino’s narrative as a bad take.
A really bad take from an unnamed source whom Charles probably misunderstood
— bill morgan (@Belisarius2020) March 31, 2024
Will the SEC Appeal Ripple Victory After the Remedies Stage?
It remains to be seen whether the SEC would challenge Judge Torres’ decision in the Second Circuit after the remedies phase. Last year, Judge Torres denied the SEC’s motion to appeal her decision on Ripple’s programmatic sales and other distributions of XRP.
She ordered the regulatory agency to wait until all pending issues of the case are resolved at the district court level before it can file a full appeal.
At the moment, the remedies litigation is the only pending issue in the lawsuit, and the SEC has already filed its opening brief. As a result, top crypto stakeholders, including Ripple CTO David Schwartz, believe the judge will issue a final decision this year.
Once the court issues the final decision, the SEC will decide whether to challenge the ruling on programmatic sales and other distributions. Meanwhile, the SEC runs the risk of elevating the Ripple verdict as a legal precedent for the broader crypto market if the Second Circuit affirms Judge Torres’ decision.
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