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SEC Appeals Ripple Case Over Complex Legal Issues While the Firm Secures Fortress Trust Acquisition

2 mins
Updated by Bary Rahma
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In Brief

  • The SEC wants an interlocutory appeal to review the "knotty legal problems" posed by the Ripple's case application of the Howey Test.
  • Ripple CLO countered that the SEC's appeal is a "hypocritical pivot" following years of its insistence on clear and steadfast rules.
  • Ripple expanded its regulatory licenses through the acquisition of Fortress Trust, strengthening its position in the industry.
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Ripple Chief Legal Officer Stuart Alderoty criticized the United States Securities and Exchange Commission (SEC) appeal as another “hypocritical pivot” by the regulator after years of insisting that the “rules are clear and must be obeyed.”

The statement comes in light of the SEC stating in its latest filing that the Second Circuit needs to review the “knotty legal problems” in applying the Howey Test.

SEC Files Response to Ripple

The SEC discussed the knotty legal problems in its September 8 motion, urging the Court to certify its interlocutory appeal.

The regulatory watchdog argues that two separate courts within the same District have arrived at differing legal conclusions on the very same matter. Furthermore, it noted that other courts are deliberating on similar legal questions.

The SEC contends that permitting the appeal and issuing a stay would be prudent. It continued that this would not only benefit it but also Ripple and all parties involved by conserving valuable resources.

Additionally, the SEC highlights that such an appeal could open the door for Ripple to seek a review from the Appeal Court regarding institutional sales. Meanwhile, the regulator noted that the crypto company’s opposition to its appeal could be a ploy to continue selling XRP.

“The SEC, as plaintiff, has an institutional interest in the efficient resolution of this case. Defendants do not. They seek to prolong this litigation (as they have already promised to do), presumably so that they may continue selling XRP into public markets (as they tacitly admit).”

Still, the financial watchdog response arguments attracted criticisms from other stakeholders. Attorney James Fillan described the SEC argument that a stay of proceedings would conserve resources as laughable.

Ripple Buys Fortress Trust

Despite the legal issues, Ripple completed the purchase of Web3 infrastructure startup Fortress Trust for an undisclosed amount.

In a September 8 statement, Ripple said the purchase helped expand its regulatory licenses to include a Nevada Trust license. The firm stated that it holds a NY BitLicense, more than 30 Money Transmitter Licenses across the US, and an in-principle Major Payment Institution License in Singapore.

Ripple US licenses
Some of Ripple’s Licenses in the US. Source: Ripple

Ripple’s president, Monica Long, said the purchase would help the firm to build and deliver best-in-class customer experiences for enterprises using its crypto infrastructure solutions. This sentiment was also shared by Brad Garlinghouse, the crypto company’s CEO, who added that:

“[Fortress Trust] will accelerate [Ripple’s] business and continue pressing our advantage in the areas critical to crypto infrastructure.”

XRP Price
XRP Price Performance. Source: BeInCrypto

These developments have not impacted XRP’s price performance in the last 24 hours. The digital asset is up by 0.75% to trade at $0.5027 as of press time, according to BeInCrypto data.

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Oluwapelumi Adejumo
Oluwapelumi believes Bitcoin and blockchain technology have the potential to change the world for the better. He is an avid reader and began writing about crypto in 2020.