A senior U.S. district judge has rejected the approach taken in the Securities and Exchange Commission (SEC) v. Ripple ruling regarding XRP. “The court declines to draw a distinction between these coins based on their manner of sale,” explained the district judge presiding over the SEC v. Terraform Labs case.
Judge Rakoff Rejects Approach in Ripple Case Over XRP
Judge Jed S. Rakoff, a senior district judge of the United States District Court for the Southern District of New York (SDNY), has disagreed with the approach taken by District Judge Analisa Torres in the U.S. Securities and Exchange Commission (SEC) v. Ripple case concerning XRP.
Judge Rakoff’s disagreement arose as part of the case filed by the SEC against Terraform Labs and its co-founder Do Kwon. The securities regulator has asked the judge not to follow Judge Torres’s reasoning in the Ripple case, stating that the ruling was “wrongly decided.” The SEC also indicated that it plans to appeal the Ripple decision.
In a court order issued on Monday for the SEC v. Terraform Labs case, Judge Rakoff expressed:
The court rejects the approach recently adopted by another judge of this district in a similar case, SEC v. Ripple Labs Inc.
“The court declines to draw a distinction between these coins based on their manner of sale, such that coins sold directly to institutional investors are considered securities and those sold through secondary market transactions to retail investors are not,” the court document further details.
Many people took to Twitter to voice their opinions regarding Judge Rakoff’s action. Former SEC internet enforcement chief John Reed Stark stated that the Ripple ruling is “already in (big) trouble.” He believes that Judge Rakoff’s decision “will certainly not be the last rejection of the Ripple decision.” Stark added: “For SEC lawyers like myself, Judge Jed Rakoff is arguably considered the most respected and experienced securities law jurist not only in the SDNY but perhaps in the entire U.S. federal court system.”
A vast number of people still believe in Judge Torres’ ruling on XRP. Some pointed out some similarities between the two rulings. Justin Browder, a partner in Willkie’s Asset Management Department, explained on Twitter: “Judge Rakoff’s opinion in Terra is far from a complete departure from the Ripple holding, contrary to some commentary that’s already circulating.” He described:
He agrees with the fundamental premise in Judge Torres’s decision — that tokens themselves are not investment contracts. What matters is how they are sold … But the application of the Howey test, particularly the reasonable expectation of profits prong, yields a different result in Terra than in Ripple.
What do you think about Judge Rakoff rejecting the approach taken by Judge Torres in the SEC v. Ripple case over XRP? Let us know in the comments section below.
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