SEC Appeals Ripple XRP Ruling as Chief Enforcement Officer Steps Down

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On October 2, the U.S. Securities and Exchange Commission (SEC) filed a notice of appeal in the ongoing Ripple lawsuit, seeking to challenge a prior ruling that has favored Ripple Labs. The original decision, delivered by Judge Analisa Torres in 2023, concluded that secondary sales of Ripple’s XRP tokens did not qualify as securities.

This ruling sent shockwaves through the cryptocurrency industry, which recently celebrated a major win for Ripple.

The SEC’s appeal was anticipated by legal experts, as the ruling undermined the regulatory agency’s interpretation of the Howey test, the legal framework used to classify assets as investment contracts.

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Judge Torres stated that XRP, in its nature, does not meet all the conditions of the Howey test, thus disqualifying secondary sales from being treated as unregistered securities. However, the judge also ruled that early sales of XRP by Ripple founders to institutional investors did count as securities sales, as those transactions were structured differently.

This mixed ruling was hailed as a big moment for Ripple, giving the company a partial victory while also bringing continued regulatory scrutiny from the SEC. The appeal could reignite uncertainty for the company.

SEC Enforcement Shakeup

Coinciding with the SEC’s notice of appeal, the agency also announced that its chief enforcement officer, Gubir Grewal, will step down from his role on October 11. Grewal had gained a reputation for pursuing strict enforcement actions against the cryptocurrency sector, launching over 100 investigations during his tenure. His exit adds an additional layer of intrigue to the ongoing Ripple case, as the SEC’s regulatory approach may shift under new leadership.

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Sanjay Wadhwa, the SEC’s deputy director of enforcement, will temporarily take over Grewal’s responsibilities while the agency searches for a permanent replacement.

Bitwise Eyes XRP ETF

Adding to the intrigue, Bitwise recently filed for an XRP ETF trust in Delaware. The filing, made on September 30, indicates growing institutional interest in Ripple’s XRP despite the ongoing legal battles.

While this move has captured attention, the appeal by the SEC may delay any formal approval for an XRP exchange-traded fund (ETF). With regulatory hurdles still in place, Bitwise and the broader crypto market will be watching the SEC’s next steps closely.