Ripple CLO Says SEC Can’t Change XRP Non-Security Status Even If It Appeals

Ripple CLO Stuart Alderoty asserts that XRP’s non-security status alongside Judge Analisa Torres’ decision on XRP secondary market sales will not change even if the SEC appeals.

He made the assertion during a recent interview with law professor J.W. Verret on Crypto Law TV. Prominent XRP community figure Digital Asset Investor shared an excerpt from the interview, focusing on what might happen if the SEC decides to appeal. 

What if the SEC appeals the @ripple case? @s_alderoty @JWVerret pic.twitter.com/xoaAAewjcy

— Digital Asset Investor (@digitalassetbuy) August 15, 2024

According to Alderoty, Judge Torres’ decisions about XRP not being security in itself and secondary market trading of XRP not constituting investment contracts remain the law of the land. 

The Ripple CLO affirmed that the Second Circuit cannot overturn this decision, irrespective of whether the SEC appeals. His confidence stems from the fact that the Second Circuit rarely reverses lower courts’ rulings within the circuit, with reversals occurring less than 10% of the time. 

“Given Judge Torres’ careful treatment of all of the issues in this case, we are very confident that the SEC won’t be successful in overturning the court’s decision,” he added. 

Furthermore, the Ripple CLO said the SEC has little chance of prevailing if it challenges Judge Torres’ ruling, specifically XRP’s non-security status, in the Supreme Court. 

Alderoty Advises SEC Not to Appeal 

The Ripple executive made the comment in response to Verret’s question about what might happen if the SEC appeals. Since Judge Torres issued the final judgment, crypto enthusiasts have been debating whether the SEC would appeal. 

Commenting, Alderoty said he would not be surprised if the SEC appeals, given that the regulatory agency usually acts irrationally. However, he advised the SEC to reconsider any appealing plans, as nothing in this case advances its core mission of protecting investors.  

He added that the case, which has no fraud allegations, victims, nor harm, does not further the SEC’s core mission. 

“The court in our case criticized the SEC for engaging in litigation gamesmanship and tactics rather than faithfully applying the law,” Alderoty said. 

Courts Will Continue to Reject SEC Theories 

Furthermore, he insists that the SEC should not appeal, noting that its litigation tactics have been unproductive so far. The Ripple CLO asserted that Judge Torres soundly rejected the SEC’s move to expand the securities law via the case. 

“[…] They’re going to continue to be rejected by courts of appeal and ultimately rejected by the Supreme Court,” Alderoty added. 

Meanwhile, the SEC does not seem to have an issue with Judge Torres’ decision on XRP’s non-security status. This was seen in its attempt to file an interlocutory appeal challenging the summary judgment decision in the case. 

At the time, the SEC sought to overturn the decision on programmatic sales and other distribution of XRP, leaving XRP’s non-security status out of the motion. However, the court denied the SEC’s interlocutory appeal request. 

Should the SEC decide to appeal again, it remains to be seen whether the commission might attempt to overturn the court’s declaration that XRP in itself is not a security.