SEC sought an immediate appeal of Ripple’s exchange-sales ruling

The U.S. Securities and Exchange Commission moved on August 18, 2023 to obtain an immediate appellate review of two adverse holdings in its enforcement case against Ripple Labs. The filing asked U.S. District Judge Analisa Torres to certify an interlocutory appeal under 28 U.S.C. § 1292(b) and to stay the remaining district-court proceedings while that request and any resulting appeal were pending.

The procedural distinction was important. The SEC had filed a motion for permission, not an appeal that the Second Circuit had agreed to hear. Judge Torres first had to certify the disputed issues; the appeals court would then have had to accept the case. Without those approvals, the litigation would continue toward remedies and trial before an ordinary appeal from a final judgment.

The two rulings under challenge

The motion targeted parts of Judge Torres’s July 13, 2023 summary-judgment order concerning Ripple’s “Programmatic Sales” of XRP through digital-asset trading platforms and its “Other Distributions” of XRP in exchange for labor or services.

The July order had divided Ripple’s XRP transactions by their circumstances rather than treating every transfer alike. It held that Ripple’s sales to institutional buyers under written contracts constituted unregistered offers and sales of investment contracts. It reached the opposite result for programmatic sales, finding that buyers in blind bid-and-ask transactions generally could not know whether their payments went to Ripple or another XRP seller. The court also found that the other distributions did not satisfy Howey’s investment-of-money requirement because recipients had not paid money to Ripple.

The SEC’s August 18 memorandum argued that both conclusions presented controlling legal questions with substantial grounds for disagreement. For programmatic sales, the agency disputed the importance assigned to buyers’ knowledge of the seller and argued that the analysis should focus on the promises and economic inducements offered to investors. For other distributions, it contended that goods, labor or services could satisfy the investment-of-money element even without a cash payment.

Why the motion reached beyond Ripple

The SEC told the court that the disputed holdings could substantially affect other pending digital-asset cases, including its litigation against Binance and Coinbase. That was an advocacy claim made by the regulator, not a judicial finding. Its institutional significance nevertheless rested on a genuine question: whether an appellate court would endorse, narrow or reject the transaction-specific reasoning applied to sales through crypto trading platforms.

The filing also invoked disagreement inside the Southern District of New York. In separate Terraform Labs litigation, Judge Jed Rakoff had declined to adopt a distinction between sales made directly to institutional purchasers and transactions involving secondary-market participants. The SEC presented that divergence as evidence that reasonable judges could disagree about how Howey applied to the transactions.

What remained unresolved on August 18

Judge Torres had authorized the SEC to file its certification motion on August 17, but that scheduling order did not signal that certification would be granted. Ripple’s opposition was due September 1, and the SEC could reply by September 8. The August 18 motion therefore opened another procedural stage without changing the July judgment or creating binding appellate precedent.

The requested stay was also unresolved. The SEC argued that immediate review could prevent duplicative remedies proceedings or trials if the Second Circuit later reversed the disputed holdings. Ripple had already maintained that the case did not present the exceptional circumstances required for an appeal before final judgment.

Later context

On October 3, 2023, Judge Torres denied certification, concluding that the SEC had not satisfied the statutory standard for an interlocutory appeal. That later outcome clarifies the motion’s fate but was not knowable on August 18. On the event date, the verified development was the SEC’s formal request to challenge the programmatic-sales and other-distributions holdings before the rest of the case concluded.