Judge Torres claimed XRP fell short of the standards set by the Howey test applied by the SEC for classification of a financial instrument as an investment contract. Consequently, secondary XRP sales were deemed not to be securities. Still, Torres ruled that early XRP sales by Ripple’s founders to institutional investors did meet the criteria for securities sales given the type of the transactions involved.

Legal experts predicted that the appeal of the SEC would be appealing since the bigger bitcoin market and Ripple Labs would stand to gain greatly from the 2023 decision. The ruling had given clarity and relief for digital asset projects under SEC regulatory examination.

That same day the appeal, set for October 11, was announced by Chief of SEC enforcement Gubir Grewal under resignation. Leading more than one hundred enforcement investigations, Grewal had been observed for his aggressive actions against the crypto industry. Sanjay Wadhwa, the SEC’s deputy director of enforcement, has been assigned the temporary enforcement chief until a permanent replacement is found.

XRP seems to be attracting interest in institutions as well. Bitwise registered a notice of incorporation for an XRP exchange-traded fund (ETF) in Delaware on Sept. 30 after signing prospective motions toward an XRP trust. Nevertheless, the most recent SEC appeal can cause delay for an XRP ETF considering the still-undetermined legislative environment.

The outcome of the appeal by the SEC will be carefully watched since it will influence general future ownership of digital assets in the United States.

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