Nonprofit organization Better Markets has thrown its support behind the U.S. Securities and Exchange Commission (SEC) by filing an amicus brief in its appeal against Ripple Labs.
The short is asking the Second Circuit Court of Appeals to reverse a 2023 district court ruling that exempted Ripple’s XRP sales to retail investors from U.S. securities laws.
The nonprofit flagged the decision in its brief, arguing that the court misapplied the Howey test and compromised the integrity of investor protections.
The ongoing SEC vs Ripple case has far-reaching implications for the crypto industry as it could determine how digital assets are classified under the securities laws.
An amicus brief is a legal document filed by a non-party with a significant interest in a case that provides information or perspectives in support of the court’s decision, often in appellate or public interest cases.
The letter states that sales of
The organization pointed out that the court had overlooked the economic reality of Ripple’s activities, stating that investors clearly expected profits from Ripple’s promotional efforts.
It also warned that the decision weakens investor protections by creating a loophole for the sale of digital assets, putting retailers at greater risk.
“The district court’s decision has the perverse effect of protecting institutional investors, but not retail investors,” Better Markets noted, calling on the appeals court to correct this imbalance.
Ripple’s marketing strategies, which included extensive promotion of XRP’s potential value, were designed to entice retail buyers and create profit expectations tied to Ripple’s efforts, the brief said.
A brief history
Initially the SEC submitted its lawsuit in December 2020, accusing Ripple, CEO Brad Garlinghouse and co-founder Chris Larsen of raising more than $1.3 billion through unregistered XRP sales.
The case was launched under former SEC Chairman Jay Clayton and intensified under Chairman Gary Gensler as the agency argued that XRP meets the Howey Test criteria for investment contracts.
In 2022, crypto exchange Coinbase filed its own amicus brief in support of Ripple, but mainly focused on the SEC’s lack of clear guidelines for digital assets.
The exchange flagged that the removal of XRP from major platforms after the lawsuit caused a market loss of $15 billion.
Ripple initially gained ground in July 2023 when a district court ruled that selling XRP to retail investors on exchanges did not violate securities laws.
However, the same court ruled against Ripple liable for $125 million in August 2024, declaring that the sale of institutional XRP violated securities regulations.
The SEC formally appealed the October 2024 retail sale decision, which said Ripple’s marketing created clear profit expectations among investors, which met the Howey Framework. It was then followed by Ripple’s cross-appeal.
The regulator has intensified its fight against Ripple Labs by submit a more detailed appeal last Wednesday, building on the first appeal from October.
The Ripple case has also shed light Genslers controversial approach to crypto enforcement. Critics have accused Gensler of using Ripple as a high-profile example to assert regulatory authority over the crypto industry.
As Gensler resigns, pro-crypto acting SEC chairman Mark Uyeda He is expected to take a friendlier stance than his predecessor, fueling speculation that a settlement is on the horizon.
Better Markets CEO Dennis Kelleher has a history of vocal opposition to crypto, regularly criticizing the industry.lawless business model‘ and label it as a ‘fraud on the public.”
Last January, Kelleher sent a strongly worded letter letter to the SEC urging it to reject applications for spot Bitcoin exchange-traded funds (ETFs), saying the agency would be making a “serious, if not historic, mistake.”
Edited by Sebastian Sinclair
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