Ripple Labs was granted a mixed win by a federal judge in its lawsuit with the US Securities and Exchange Commission (SEC).
This prompted the agency to file new documents against its case with Terraform Labs and Do Kwon, its CEO, late on Friday.
In addition, the SEC also added that the decision in the Ripple lawsuit was flawed and they could appeal it.
According to the new documents that the SEC filed in the lawsuit against Terraform Labs on Friday, the agency is now hinting at appealing the rulings in the Ripple case.
The ruling from the federal judge dictated that no securities laws had been violated by Ripple by offering the native XRP token to retail investors.
But, it added that offering the token to institutional investors was a violation of the securities laws. The move from the SEC came in response to a filing from lawyers of Terraform earlier this week.
The attorneys said that their defense has been strengthened after the Ripple ruling, so they filed a request for the lawsuit to be dismissed.
The Howey test is at the heart of the controversy, a legal test that has been created for determining whether a financial product is an investment contract, which would bring it under the regulatory oversight of the SEC.
The documents filed said that despite the assertions from Ripple, most of the rulings supported the claims of the SEC.
They also said that the practices of Ripple Labs were against the Howey test. They said that the decision was wrong and the court should not follow them in the Terraform Labs lawsuit.
The filings from the SEC on Friday against Do Kwon and Terra show that the agency believes the judge who issued the ruling in the Ripple case should dismiss the ones related to the XRP token sales.
The agency claimed that Ripple has created an artificial distinction between what sophisticated retail and institutional investors expect.
The SEC said that if the said distinction stands, then it would be in conflict with the Howey test.
The SEC’s claims
The regulator went on to argue that even if there are substantive factual differences, then the Ripple lawsuit still benefits the position of the SEC.
It said that reasonable inferences should be drawn by the court in their favor because even if institutional investors purchased the XRP token of Ripple Labs, they did it as an investment opportunity.
The lawsuit between Terraform Labs, its chief executive Do Kwon, and the SEC has been ongoing since the start of the year, after the company’s downfall.
The TerraUST stablecoin lost its dollar peg last year, which wiped out about $40 billion of institutional and retail investors’ funds.
The SEC said in its concluding argument that the underlying logic behind the ruling in the Ripple case was different from the basic principles of the Howey test.
It also said that there were also broad differences from the federal securities laws.