The legal dispute between Ripple Labs, Inc. and the US Securities and Exchange Commission (SEC) witnessed a surprising development as Higher Markets, Inc., a outstanding nonprofit dedicated to promoting public interest in financial markets, filed an amicus curiae temporary on January 22. This latest submission to america Court of Appeals for the Second Circuit vehemently supports the SEC’s appeal against a previous district court decision, which narrowly defined the term “investment contract” and its applicability to XRP.

Within the temporary, Higher Markets criticizes the district court’s interpretation of the Howey test, traditionally used to find out whether a transaction qualifies as an investment contract and thus a security. In accordance with Higher Markets, the lower court’s ruling improperly excluded XRP tokens sold through secondary markets from securities regulation, focusing narrowly on the direct purchase from the issuer as a criterion for classification.

#XRPCommunity #SECGov v. #Ripple #XRP @Ripple Higher Markets Inc. has filed an Amicus Temporary in Support of the @SECGov.https://t.co/cu8lTLBqtM

— James K. Filan 🇺🇸🇮🇪 (@FilanLaw) January 22, 2025

A Last Call Against Ripple And XRP

The temporary from Higher Markets asserts, “The district court dramatically narrowed the definition of an ‘investment contract,’ removing an unlimited variety of crypto offerings and potentially many other investments from the reach of the securities laws.” They argue that this interpretation contradicts longstanding legal principles that aim to adapt to evolving financial practices and protect investors from emerging risks.

Highlighting a critical error, the temporary points out, “The court’s ruling on the status of those secondary sales or ‘Programmatic’ transactions under Howey was erroneous.” Higher Markets emphasizes that the character of an investor’s acquisition doesn’t change the basic expectation of profits derived from the efforts of others, a cornerstone of the Howey test.

Higher Markets challenges the district court’s understanding of the economic realities surrounding Ripple’s token sales, particularly the influence of Ripple’s marketing and promotional efforts on investor expectations. The temporary notes, “Ripple conducted a sales campaign through a wide selection of primers, brochures, market reports, public interviews, press conferences, and social media platforms…Most were publicly disseminated or publicly available.”

The organization also criticizes the district court’s assumption concerning the sophistication of retail investors, stating, “The district court’s dim view of retail investors ignores modern-day economic realities…Many retail investors are exposed to recent investment offerings and trends through social media platforms that promoters increasingly depend on to draw investors’ funds.”

The temporary starkly warns of the implications for investor protection if the district court’s decision stands, highlighting the potential for widespread predation within the crypto securities market, which might disproportionately affect less sophisticated retail investors. Higher Markets argues, “Without jurisdiction over a majority of these securities, the SEC will lose its ability to guard these two classes of investors—those that trade on exchanges and those that lack sophistication—from the widespread predations within the crypto securities markets.”

Nevertheless, it is extremely questionable whether the letter may have any significance in any respect. Mark Uyeda’s recent appointment because the acting Chair of the US Securities and Exchange Commission (SEC) has sparked speculation a few potential resolution to the SEC’s lawsuit against Ripple under Uyeda’s interim leadership.

Notably, the SEC has scheduled a closed-door meeting under Uyeda’s leadership for today, January 23 which further fueled speculation on the long run of Ripple’s legal case. Rumors suggest that the SEC’s upcoming meetings could address settlement possibilities, potentially impacting Ripple’s legal trajectory.

At press time, XRP traded at $3.14.

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