The Appeals Process (2024-2025)
Learning Objectives
Explain the federal appeals process and how it applies to SEC enforcement cases
Describe what each side appealed and the legal issues at stake
Trace the timeline of appeals from filing through dismissal
Analyze why settlement negotiations emerged and what both sides sought
Understand how the appeals' dismissal affected the ruling's status
The July 2023 ruling and August 2024 remedies decision seemed like the end. Ripple had won on programmatic sales. The penalty was manageable. The market celebrated.
But federal litigation doesn't end with a district court ruling. Either party can appeal to the Circuit Court of Appeals. The SEC announced it would do exactly that—challenging the programmatic sales ruling that was the core of Ripple's victory.
For XRP holders, this meant continued uncertainty. Even if Torres was right, another court could disagree. The appeals process would take months or years. Until it resolved, XRP's legal status remained technically unsettled.
What followed was a complex dance of appeals, cross-appeals, pauses for settlement talks, and ultimately a resolution that confirmed Torres' framework without ever testing it at the appellate level.
Federal courts operate in a three-tier hierarchy:
FEDERAL COURT HIERARCHY
Supreme Court of the United States
↑ (Certiorari - discretionary review)
│
Circuit Courts of Appeals (13 circuits)
↑ (Appeal as of right)
│
District Courts (trial courts)
│
[SEC v. Ripple was here - S.D.N.Y.]
│
[Appeal goes to Second Circuit]
The SEC v. Ripple case was in the Southern District of New York, which is within the Second Circuit.
- One of the most important federal circuits
- Covers New York, Connecticut, Vermont
- Significant securities law expertise
- Often influential on financial regulation issues
Appellate courts don't retry cases. They review:
Legal questions: Did the district court correctly interpret and apply the law?
Factual review: Were factual findings clearly erroneous? (Very deferential standard)
Discretionary decisions: Did the court abuse its discretion?
For Ripple, the key question would be: Did Judge Torres correctly interpret Howey when distinguishing programmatic sales from institutional sales?
On October 2, 2024, the SEC filed its notice of appeal:
- The programmatic sales ruling (NOT securities)
- The "Other Distributions" ruling (NOT securities)
- NOT the institutional sales ruling (that went their way)
- NOT the $125 million penalty (they accepted it)
The SEC filed Form C, outlining its appellate arguments:
SEC APPELLATE ARGUMENTS
- Torres erred in requiring buyer knowledge of seller
- Howey doesn't include a "knowledge" requirement
- Economic reality: programmatic buyers had same expectations
- Same marketing, same efforts, same expectations = same result
- The distinction creates easy evasion mechanism
- Some distributions did involve "investment of money"
- Business development distributions had investment character
- Torres applied Element 1 too narrowly
- Torres elevated form over substance
- The token's nature, not the sales channel, should control
- Circuit should reverse and find ALL sales were securities
Why did the SEC appeal?
Precedent concerns:
Torres' ruling, if it stood, would create a roadmap for avoiding securities registration through exchange sales.
Institutional consistency:
The SEC couldn't let a significant defeat go unchallenged without appearing to accept it.
Legal disagreement:
The SEC genuinely believed Torres' reasoning was wrong.
Deterrence:
Even if they might not win, appealing showed the SEC would fight.
Ripple faced a choice: Just defend, or also appeal the institutional sales loss?
- Challenge the institutional sales ruling
- Potentially win complete vindication
- Pressure SEC toward settlement
- Risk losing on appeal what they won below
- Extend litigation timeline
- Add complexity and cost
Ripple chose to cross-appeal.
RIPPLE'S CROSS-APPEAL ARGUMENTS
- Torres erred in finding these were securities
- Sophisticated buyers knew XRP's characteristics
- No ongoing promises or relationship
- XRP's utility was real even for institutional buyers
- Even if sales were technically securities...
- Ripple lacked fair notice
- Due process should bar enforcement
- If programmatic sales ruling is reversed...
- Same reasoning should apply to institutional sales
- All or nothing approach is more consistent
The cross-appeal served multiple purposes:
Bargaining chip: Gave Ripple something to trade in settlement talks
Complete victory path: Possibility of winning on everything
Defensive posture: If SEC won on programmatic, Ripple could argue institutional should also be reconsidered
Federal appeals follow structured timelines:
TYPICAL APPEALS TIMELINE
1. Notice of Appeal filed
2. Briefing schedule set
3. Appellant's Opening Brief (usually 60-90 days)
4. Appellee's Response Brief (30 days after opening)
5. Appellant's Reply Brief (14-21 days after response)
6. Oral Argument scheduled (if granted)
7. Decision (months to over a year after argument)
Total typical timeline: 12-24 months
The Second Circuit set initial briefing deadlines:
January 2025: SEC's opening brief due (later extended)
Subsequent deadlines: Ripple's response, SEC's reply
The briefing schedule was repeatedly adjusted:
- Complex legal issues requiring thorough briefing
- Settlement discussions emerging
- New SEC leadership taking office
- Parties requesting pauses
Several factors shifted the litigation environment:
SEC leadership change:
Gary Gensler's departure and new leadership signaled potential policy shifts.
Political environment:
A more crypto-friendly regulatory approach emerged.
Cost-benefit calculus:
Both sides faced continued uncertainty and expense.
Practical considerations:
XRP was already trading; ETFs were being considered; prolonging uncertainty served no one.
In March 2025, reports emerged that settlement discussions were underway:
Ripple's statement:
Brad Garlinghouse announced the SEC had agreed to drop its appeal.
SEC's position:
Required internal approval process, including new Commissioner votes.
On April 10, 2025, the parties filed a joint motion to pause ("hold in abeyance") the appeals:
- Parties had reached agreement in principle
- Settlement terms were being finalized
- Briefing should be suspended
April 16, 2025:
The Second Circuit granted the motion, pausing the appeals.
The settlement framework became clear:
SETTLEMENT FRAMEWORK (SPRING 2025)
- Would drop appeal of programmatic sales ruling
- Would accept Torres framework
- Would drop cross-appeal of institutional sales ruling
- Would accept $125 million penalty
- Would accept permanent injunction
- Whether to modify/dissolve the injunction
- Return of escrowed penalty funds
- Final procedural steps
On May 8, 2025, the SEC announced a settlement:
- SEC drops appeal
- Ripple pays reduced penalty ($50 million of the $125 million)
- Injunction to be dissolved
- Case fully resolved
Judge Torres' response:
She rejected the initial request, finding it didn't meet requirements for modifying a final judgment.
The parties submitted a revised motion:
June 12, 2025:
Renewed joint motion with additional justification.
June 26, 2025:
Judge Torres again rejected the motion, questioning why the injunction should be eliminated.
Following the rejection, Ripple announced it would drop its cross-appeal:
Garlinghouse statement:
"Ripple is dropping our cross appeal, and the SEC is expected to drop their appeal."
- Ripple accepted the institutional sales ruling
- Ripple accepted the full $125 million penalty
- Ripple accepted the permanent injunction
- Focus shifted to ending the case entirely
August 8, 2025:
SEC announced the final settlement, returning $75 million of escrowed funds to Ripple.
August 22, 2025:
The Second Circuit approved dismissal of all appeals, formally ending the case.
Because the appeals were dismissed rather than decided:
Torres' ruling is the final word in this case
Programmatic sales finding remains intact
Framework has not been tested or validated by appellate court
Other courts aren't required to follow Torres
The Second Circuit didn't endorse the reasoning
Future cases could go differently
The settlement means:
No Circuit Court opinion:
We'll never know how the Second Circuit would have ruled.
Torres' ruling stands but isn't elevated:
It remains a district court opinion—persuasive but not binding precedent.
Questions remain open:
The legal debates about programmatic sales vs. institutional sales remain theoretically unresolved.
Despite theoretical uncertainty:
Practical effect:
XRP's status is settled for practical purposes. Exchanges have relisted. ETFs have been approved. The market treats XRP as having regulatory clarity.
Regulatory signaling:
The SEC's decision to settle rather than appeal suggests acceptance (or at least non-pursuit) of the Torres framework.
✅ The SEC genuinely disagreed with Torres. The appeal wasn't performative—the SEC believed the programmatic sales ruling was wrong.
✅ Settlement became preferable to both sides. Extended litigation served neither party's interests once the regulatory environment shifted.
✅ Torres' reasoning was never tested. We don't know if appellate courts would agree with the programmatic sales distinction.
✅ Practical resolution was achieved. Despite theoretical loose ends, the case is over and XRP has functional clarity.
⚠️ How appellate courts view Torres' reasoning. The Second Circuit never weighed in.
⚠️ Applicability to other tokens. Without appellate validation, Torres' framework is just one judge's view.
⚠️ Future SEC approaches. A future SEC could take different positions in new cases.
The appeals process ended through settlement rather than judicial decision. This is good news for XRP because Torres' favorable ruling stands—but it's not unqualified good news because the ruling was never validated by higher courts. For practical purposes, XRP has regulatory clarity. For legal precedent purposes, the questions remain open. This uncertainty is unlikely to matter unless the SEC or a future litigant raises similar issues in a new case.
Assignment: Create a detailed timeline of the appeals process with key dates and what each development meant for XRP's legal status.
Requirements:
Key filing dates
Settlement discussion milestones
Court rulings/orders
Final resolution dates
What happened
Why it mattered
How the market/community responded
What were the possible outcomes?
How might each outcome have affected XRP?
Was settlement better for XRP than a Second Circuit decision?
Total length: Timeline visual + approximately 750-900 words
- Accuracy of dates and events (30%)
- Quality of event explanations (30%)
- Insight of "What If" analysis (25%)
- Visual clarity (15%)
Time investment: 2 hours
Value: Understanding how appeals shape final outcomes helps assess ongoing litigation affecting other crypto assets.
1. SEC Appeal Focus:
What aspect of Judge Torres' ruling did the SEC primarily appeal?
A) The $125 million penalty being too low
B) The institutional sales ruling finding Ripple violated securities laws
C) The programmatic sales ruling finding those sales were NOT securities
D) The dismissal of claims against Garlinghouse and Larsen
Correct Answer: C
Explanation: The SEC appealed the programmatic sales ruling—the finding that exchange sales weren't securities. This was the heart of Ripple's victory. The SEC didn't appeal the institutional sales ruling (which went their way) or the penalty amount. The appeal aimed to establish that ALL XRP sales, regardless of channel, were securities transactions.
2. Cross-Appeal Purpose:
Why did Ripple file a cross-appeal challenging the institutional sales ruling?
A) Because Ripple disagreed with the $125 million penalty
B) To create a bargaining chip for settlement negotiations and preserve the possibility of complete victory
C) Because the Second Circuit required cross-appeals
D) To delay the appeals process
Correct Answer: B
Explanation: Ripple's cross-appeal served strategic purposes: it gave Ripple something to trade in settlement negotiations and preserved the possibility of winning on all counts if the appeal proceeded. If the SEC won reversal of programmatic sales, Ripple wanted the opportunity to argue institutional sales should be reconsidered too.
3. Settlement Catalyst:
What factor contributed significantly to settlement discussions emerging in early 2025?
A) Judge Torres ordered the parties to settle
B) XRP's price crashed, making litigation unaffordable
C) SEC leadership changed, and new leadership signaled a different approach to crypto enforcement
D) Ripple ran out of legal resources
Correct Answer: C
Explanation: Gary Gensler's departure and new SEC leadership (Paul Atkins confirmation in April 2025) signaled a shift toward a more crypto-friendly regulatory approach. This changing environment made settlement more attractive than continued litigation, leading to the joint motion to pause appeals and eventual resolution.
4. Torres Ruling Status:
After the appeals were dismissed, what is the precedential status of Judge Torres' ruling?
A) It became binding precedent for all federal courts
B) It remains a district court opinion—the final word in this case but not binding on other courts
C) It was vacated and has no legal effect
D) The Second Circuit validated and strengthened it
Correct Answer: B
Explanation: Because the appeals were dismissed rather than decided, Torres' ruling stands as the final word in the Ripple case but remains a district court opinion. It's persuasive authority that other courts may cite, but it's not binding precedent. The Second Circuit never ruled on the merits, so we don't know if they would have agreed.
5. Practical Effect:
What was the practical effect of the appeals' dismissal for XRP holders?
A) XRP became illegal to trade in the United States
B) All XRP had to be registered as a security
C) Torres' favorable programmatic sales ruling remained intact, supporting exchange listings and eventually ETF approval
D) The case was returned to trial court for a new trial
Correct Answer: C
Explanation: The dismissal preserved Torres' ruling finding programmatic sales weren't securities. This practical clarity enabled exchanges to maintain XRP listings and supported the eventual approval of XRP ETFs in late 2025. While the ruling lacks appellate validation, its practical effect is that XRP has functional regulatory clarity for market participants.
- SEC Notice of Appeal and Form C (October 2024)
- Joint Motion to Hold Appeal in Abeyance (April 2025)
- Second Circuit Order Dismissing Appeals (August 2025)
- Analysis of potential Second Circuit approaches
- Discussion of settlement dynamics in SEC cases
- Impact of leadership changes on pending litigation
- Reporting on settlement discussions
- Market reactions to appeals developments
- Community tracking of case milestones
For Next Lesson:
Lesson 13 covers the final settlement in detail—the exact terms, what each side gained and conceded, and what the resolution means for XRP going forward.
End of Lesson 12
Total words: ~4,200
Estimated completion time: 55 minutes reading + 2 hours for deliverable
Key Takeaways
Both sides appealed.
The SEC challenged programmatic sales; Ripple cross-appealed institutional sales. Neither accepted the split decision without challenge.
Settlement discussions emerged with SEC leadership change.
New leadership and shifting regulatory priorities made prolonged litigation less attractive.
Multiple settlement attempts required.
Judge Torres rejected initial attempts to modify the injunction, leading Ripple to accept the original terms.
Appeals were dismissed, not decided.
The Second Circuit approved joint dismissal without ruling on the merits—so we never learned how they would have decided.
Torres' ruling stands but isn't binding precedent.
Dismissal preserved the district court ruling without creating appellate precedent that would bind other courts. ---