The Securities and Exchange Commission has withdrawn its appeals in the Interlocutory Appeals Court in its landmark cases against Ripple Labs and Coinbase, signaling a dramatic shift in enforcement strategy under incoming Chair Paul Atkins. The move effectively ends the agency’s years-long legal battles that defined the previous administration’s approach to crypto regulation.
In a filing with the Second Circuit Court of Appeals, the SEC notified judges it would not pursue appeals of Judge Analisa Torres’ July 2023 ruling that XRP sales on public exchanges did not constitute investment contracts. The decision had been a significant setback for the agency’s theory that virtually all token sales violate securities laws.
Simultaneously, the commission moved to dismiss its appeal in the Coinbase case, where it had challenged a district court’s decision to allow the exchange’s motion for interlocutory appeal on the definition of “investment contract” as applied to digital assets. The SEC’s enforcement division had argued that the Howey test applies broadly to token offerings, a position Atkins has publicly criticized as overly expansive.
“The Commission has determined that continued litigation of these appeals is not in the public interest,” the SEC said in a brief statement. “Chairman Atkins has directed a comprehensive review of pending enforcement actions involving digital assets to ensure consistency with the Commission’s statutory mandate and the Supreme Court’s Howey framework.”
The news sent XRP surging 28% to $1.85, its highest level since December 2021, while Coinbase shares jumped 15% in after-hours trading. Market participants viewed the withdrawals as the clearest signal yet that the Atkins-led SEC will pivot from enforcement to rulemaking.
Ripple CEO Brad Garlinghouse called the decision “a vindication for the entire industry” and said the company would now focus on expanding its cross-border payments business in the United States. Coinbase CEO Brian Armstrong posted on X: “The rule of law prevailed. Now let’s build.”
Legal experts noted that the SEC’s withdrawal does not constitute a formal admission that its legal theories were wrong, but it effectively cedes the legal precedent established by the district courts. Judge Torres’ ruling that programmatic sales of XRP on exchanges are not securities transactions will stand as binding precedent in the Southern District of New York.
The SEC’s enforcement division, which brought over 100 crypto-related actions under Gensler, is expected to see significant restructuring. Sources indicate Atkins plans to reassign many enforcement attorneys to a new Office of Digital Asset Policy, tasked with developing a comprehensive regulatory framework through formal notice-and-comment rulemaking.
Commissioner Hester Peirce, who has long advocated for a “safe harbor” proposal giving token projects a three-year window to achieve decentralization, is expected to play a leading role in the rulemaking process. Her proposal, first introduced in 2020 and updated in 2023, could form the basis of the new framework.
Industry groups including the Blockchain Association and the Crypto Council for Innovation welcomed the development but urged Congress to codify regulatory clarity through legislation. “Administrative policy can change with each administration,” said Blockchain Association CEO Kristin Smith. “Only Congress can provide the durable framework this industry needs.”
Source: The Crypto Investigator
