SEC vs Ripple, the legal battle intensifies as XRP holders expect new changes from SEC appeal

• The court grants the SEC’s request to file a motion for an interlocutory appeal; the regulator wants the application of the Howey Test revisited.
• Ripple’s partial victory against the SEC could be reversed if Judge Torres’ ruling on XRP token sales on crypto exchange platforms is brought up.
• Attorney James Filan explains that setting a briefing schedule does not mean that the SEC’s request is granted.

XRP community members have been closely following the US Securities & Exchange Commission’s (SEC) every move against Ripple. In the latest update, the regulator’s request to file a motion for interlocutory appeal has been approved by the court. Ripple filed its opposition to the SEC’s request on August 16. However, Judge Torres replied on Thursday, allowing the SEC’s filing.

A briefing schedule has been set, and the SEC is ready to challenge the application of the Howey Test to sales of XRP tokens to retail traders on exchanges. The Howey Test comes from a 1946 US Supreme Court ruling in which the court specified four criteria for determining whether an asset can be considered an “investment contract”. If XRP meets the criteria of the Howey Test, then the asset must be registered as a security. This could have a longstanding impact on the XRP holder community. 

Also read: Ripple opposes SEC motion to file an appeal, waits for final verdict in SEC vs Ripple lawsuit

Why the SEC’s filing of motion for interlocutory appeal could be a game-changer

As of Thursday, August 17, the court approved the SEC’s request to file a motion for an interlocutory appeal. Here’s what to expect on the key dates following this approval:

• The SEC will file its motion for interlocutory appeal on Friday, August 18.
• Ripple and its executives (defendants) shall file their opposition by September 1.
• SEC will file a reply (if any) by September 8.

In its August 9 request to file a motion for leave to file an interlocutory appeal, the regulator argued that Judge Torres’ ruling where there is “a distinction between purchasers” is not appropriate as one Judge in the district clarified, “[The] Howey [Test] makes no distinction between purchasers.” 

Judge Torres’ ruling on XRP’s status as a “non-security” is likely under threat due to the interlocutory appeal and the SEC’s request that the ruling be revisited on “substantial ground for difference of opinion.” It's important to note that once the interlocutory appeal is accepted, the SEC’s legal team needs to prove that Judge Torres’ application of the Howey Test was not acceptable in order to reverse Ripple’s partial victory.

The statements highlighted in the image below are taken from the SEC’s motion and shed light on what the regulator expects to achieve from the appeal.

SEC’s request to file a motion for interlocutory appeal

These statements by the SEC are likely the ones that could have a substantial impact on Ripple’s partial victory. Judge Torres differentiated between purchasers, retail traders on exchanges, on-demand liquidity clients and programmatic sales of XRP made by Ripple and its executives. In her ruling, Torres declared, “XRP is not an investment contract” when sold on exchanges to retail traders.

Ripple’s partial win catalyzed the token’s relisting, its price recovery and higher adoption worldwide. However, this ruling is likely to be reversed with the SEC’s attempt to get the Howey Test applied with no distinction between purchasers. This is the “game changing” element of the SEC’s appeal. 

How does this impact XRP price

With the SEC request to file motion for interlocutory appeal accepted:

XRP price plummeted in response to the acceptance of the SEC’s request to file a motion. The sentiment in the XRP community likely flipped bearish as XRP holders considered the likely outcomes of the interlocutory appeal, and the following trial, if any.

At the time of writing, it is clear that Judge Torres’ ruling on the Ripple lawsuit is not going to trial. The SEC’s appeal comes first, and once the outcome is known, the two parties will be closer to the end of litigation. 

XRP price has recovered from its August 17 low of $0.4232. At the time of writing, the altcoin’s price made a comeback above key resistance at $0.5081. The altcoin continues to trade below its three long-term Exponential Moving Averages (EMAs) –the 10, 50 and 200-day EMAs at $0.5865, $0.6124 and $0.5250, respectively.

If the SEC’s interlocutory appeal is accepted and ruling is unchanged:

XRP price recovery is likely to be catalyzed by its “non-security” status, derived from Judge Torres’ ruling on the lawsuit and Ripple’s partial win. In this event, the XRP price rally could push the altcoin up to 100% higher. In the event of a rally, XRP price could post 70% gains and hit the $1.234 target.

Check this post for price targets.

If SEC’s interlocutory appeal is accepted and the ruling is overturned:

XRP price could suffer a steep decline, wiping out all prior gains from Ripple’s partial win against the SEC. If the two key support levels at $0.413 and $0.433 are breached, then XRP price could crash to $0.331 or lower.

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