Why the SEC’s Ripple XRP appeal deadline matters now

The August 22, 2025, dismissal of appeals in the Second Circuit means the July 13, 2023, summary judgment from Judge Analisa Torres is the governing law for this dispute. I recommend this precedent because it clarifies that programmatic sales to public buyers are not unregistered securities. The court found that programmatic buyers on digital asset exchanges do not know the identities of the sellers, which prevents them from forming a reasonable expectation of profits based on the managerial efforts of a third party. This ruling allows retail exchanges to list XRP with confidence. The legal battle began in December 2020 when the SEC alleged Ripple, CEO Bradley Garlinghouse, and Chairman Christian Larsen raised $1.3 billion through unregistered sales. The court’s split decision found that $728 million in contracts for institutional sales were unregistered securities. Those specific buyers purchased XRP with the expectation of deriving profits from Ripple’s efforts, satisfying the requirement of horizontal commonality where investor fortunes tie to the overall enterprise. In contrast, the court ruled that distributions to employees and developers are not investment contracts. The court’s decision is based on the economic reality of the transactions.

Regulatory status shifts

The March 17, 2026, joint release from the SEC and CFTC named XRP as one of sixteen digital commodities. This interpretive release follows the November 13, 2025, launch of the Canary XRP ETF on Nasdaq. I find the $125 million civil penalty is a heavy burden for Ripple, especially since Judge Torres denied the May 16, 2025, motion to reduce the amount to $50 million. This denial occurred because the parties failed to satisfy the exceptional circumstances required by Federal Rule of Civil Procedure 60(b) and attempted to bypass the Second Circuit’s jurisdiction. You should keep an eye on the original August 7, 2024, judgment since it is the operative order despite the proposed settlement. The SEC originally sought roughly $876 million in penalties, but Judge Torres rejected disgorgement because the agency failed to demonstrate measurable investor harm. This shift in enforcement occurred after the change in US administration in early 2025.

Unresolved judicial splits

Legal uncertainty persists because of disagreement among federal judges regarding the Howey test. Judge Jed Rakoff rejected the Torres reasoning in the SEC v. Terraform Labs case by stating that Howey makes no distinction between retail and institutional purchasers. The court found that a purchaser buying coins directly versus through a secondary transaction lacks impact on whether a reasonable individual views the actions as promising profits. I find the lack of statutory certainty is frustrating as the CLARITY Act remains pending in the Senate. The March 2026 interpretive release, which utilized a function-driven classification framework to determine that XRP lacks the profit-sharing, income streams, and entity ownership claims characteristic of investment contracts, is an agency position that the current administration could rescind. The Second Circuit’s decision to dismiss the appeals ended the litigation but did not produce a statutory definition. The disagreement between the two judges is a variable for legal teams to consider in future filings. Do you think the CLARITY Act will provide permanent statutory law?