SEC Mentions Terra Judge Ruling During Appeal Request in Ripple Case

The SEC says ruling in favor of Ripple poses controlling questions of law, as reflected in the Terra case, where Judge Rakoff rejected Judge Torres’ reasoning.    

It is common knowledge that the SEC is requesting permission to appeal Judge Analisa Torres’ decision on Ripple’s programmatic sale of XRP and other distributions. 

SEC References Terra Judge Ruling in Appeal Request

To get its interlocutory appeal request approved, the securities regulator said Judge Torres’ ruling on Ripple’s programmatic sale of XRP and other distributions involved “controlling questions of law on which there is substantial ground for differences of opinion.” 

Per the SEC, the main legal questions in these cases depend on whether two judges in the same district agree or not. One of the judges, Jed Rakoff, in charge of the Terra case, did not accept the logic of the other judge, Analisa Torres, who ruled on the Ripple case.

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Notably, Judge Rakoff’s emphasis was on Torres’ distinction between Ripple’s sales to institutional and retail investors. Recall that Judge Torres ruled that Ripple’s XRP sales to institutional investors constitute securities, while programmatic sales and other distributions are not. 

She found that while institutional investors reasonably expected to make gains directly from Ripple’s efforts, retail buyers of XRP had different expectations. 

However, Judge Rakoff denied Terra and its founder Do Kwon’s motion to dismiss the SEC’s case against them using Judge Torres’ ruling as a legal precedent. 

The Terra judge rejected the Ripple ruling, stating that the Howey test- a longstanding security test in the US- does not distinguish between buyers.  

Interestingly, the SEC is using Judge Rakoff’s remark as a basis to request an interlocutory appeal. 

Notably, the development was spotted and shared by prominent XRP influencer Sherrie. 

Oh my! SEC makes mention of “an intra-district split” in the Terraform Labs lawsuit (referring to what Judge Rakoff said). Next is KEY here: if Torres denies the interlocutory appeal there may be an “appeal from final judgment” pic.twitter.com/vadek4IFqF

— Sherrie 🌸 (@CherryEmpress21) August 10, 2023

SEC May Appeal Final Ruling If Court Denies Its Interlocutory Request 

The crypto community has been split on whether Judge Torres will approve the SEC’s request. Top legal expert Scott Chamberlain predicted that Judge Torres would deny the request. 

Notably, the SEC has already hinted at plans to appeal the final judgment if Judge Torres denies its interlocutory appeal. 

The SEC wrote in its letter that the interlocutory review would help the parties avoid spending a lot of time and money on two different lawsuits that have the same legal issues.

Per the SEC, the first remedy litigation could be held on Ripple’s sales of XRP to institutional investors. The second remedy litigation could also occur if the SEC appeals the final judgment following Judge Torres’ denial of its interlocutory appeal request. 

“Interlocutory review would permit the Court and the parties to avoid the possibility of engaging protracted remedies phase litigation twice—once now as to Ripple’s Institutional Sales, and once more if any SEC appeal from a final judgment (should this motion be denied) results in reversal in whole or in part,” the SEC said in its letter.