SEC v Ripple: SEC Extension Request Fuels Investor Optimism

SEC v Ripple case-related updates garnered investor attention this week.

On Tuesday (February 27), the SEC filed a request to extend the deadline to submit its remedy-related brief by one week to March 22. The filing also requested extensions to the deadlines for Ripple to submit its remedy-related brief and for the SEC to file its reply brief. The court approved the request on Friday, March 1.

The SEC and Ripple are preparing remedy-related briefs. The SEC will argue for a punitive penalty for the unregistered XRP sales to institutional investors. In July 2023, Judge Analisa Torres ruled Ripple breached Section 5 of the US Securities Act for failing to register XRP in sales to institutional investors.

Ripple will cite case law to argue against a punitive penalty. The court will only consider XRP sales to US institutional investors (Morrison v NAB). Ripple may also seek an exemption to Section 5 for XRP sales to accredited investors. The court will also base a penalty on net proceeds from XRP sales to US institutional investors (Liu v SEC), allowing Ripple to deduct expenses.

However, the strength of arguments could hinge on post-complaint activity. Judge Torres could impose a punitive penalty if Ripple continued to breach Section 5 after the SEC filed the complaint.

Nonetheless, investors reacted positively to the SEC request for an extension. On the one hand, the SEC may need more time to consider documents from discovery. On the other hand, the SEC may have no basis to argue for a punitive penalty.

XRP was up 12.24% to $0.6091 Monday (February 26) to Saturday (March 2).