Ripple vs SEC Lawsuit: Former SEC Official Argues Potential Success Of Interlocutory Appeal

There have been several debates on the likelihood of the court granting the US Securities and Exchange Commission’s (SEC) motion for an interlocutory appeal in its legal battle against Ripple Labs. Following this, a former SEC official has come out to give his opinion on the likelihood of this happening. 

Will The SEC’s Motion Be Granted?

Former SEC official Marc Fagel noted on his X (formerly Twitter) handle that the “specific requirements for an interlocutory appeal are hard to meet.” As such, he believes the odds are against the SEC, and the Commission’s request is more likely to be denied. 

I agree with those points, and think they should factor in. However, the specific requirements for interlocutory appeal are hard to meet. I think the odds are against granting the request unless the court looks to the points you raise.

— Marc Fagel (@Marc_Fagel) September 9, 2023

Fagel’s tweet came in response to a question directed at him by a member of the XRP community. The user had asked for Fagel’s opinion on the likelihood of the court granting the SEC’s request for an interlocutory appeal and if certain factors could influence the court’s decision. 

These factors included the fact that the SEC’s case against Ripple seemed “important” for the crypto industry and how it bordered on novel areas of law. The X user also explained that there were currently conflicting rulings regarding the disparities in the Terraform and Ripple cases.

In Terraform’s case, the judge said that cryptocurrencies could be securities, and it didn’t matter if they were sold directly or not to investors. Meanwhile, in the Ripple case, Judge Torres ruled that Ripple’s programmatic sales and other distributions didn’t constitute investment contracts. 

Despite the odds being against the SEC, Fagel said that these factors, which the user mentioned, could increase the Commission’s chances of being granted an interlocutory appeal if the court were to consider those key points. 

SEC’s Crypto Enforcement “Largely Successful”

Many, especially in the crypto community, had opined that the SEC’s losses against Ripple and Grayscale proved that the Commission was failing in its clampdown on the crypto industry. Despite this, Fagel believes that the SEC’s crypto enforcement actions have been “largely successful.”

Fagel noted that the SEC only suffered a partial loss in the summary judgment given by Judge Analisa Torres and was able to prove that the crypto firm “illegally raised $700M in unregistered securities sales.”

He points out that the SEC still has “tough battles ahead” in its crypto enforcement actions. In his opinion, the “exchange case” poses novel and thorny questions, which the SEC might have difficulty making its argument stick in court. 

The “exchange case” in this context is most likely about the SEC’s case against Binance and Coinbase, most especially with the latter filing a motion to dismiss the lawsuit on the ground that the Commission doesn’t have regulatory jurisdiction over crypto sales on exchanges as these tokens do not qualify as securities.