On August 21, 2026, Judge Analisa Torres granted Ripple’s motion to strike several sections of the SEC’s opening brief in its appeal of the 2023 programmatic sales ruling. The order removes arguments the SEC tried to introduce for the first time on appeal—arguments that weren’t part of the original summary judgment record.
This is not a procedural footnote. It’s a signal that the Second Circuit may view the SEC’s appeal with the same skepticism Torres showed at trial.
What Happened
The SEC lost the programmatic sales portion of its case against Ripple in July 2023. Judge Torres ruled that XRP sales on secondary exchanges did not constitute securities transactions because buyers had no reasonable expectation of profit from Ripple’s efforts. The SEC appealed in October 2023.
In its opening appellate brief, the SEC introduced new factual assertions and legal arguments not presented during summary judgment. Ripple moved to strike those sections under Federal Rule of Appellate Procedure 10(a), which restricts appellate records to materials from the lower court proceeding.
Torres granted the motion. The stricken sections include new characterizations of Ripple’s post-sale conduct, reframed Howey test arguments, and claims about investor understanding that weren’t part of the trial record.
Why This Matters More Than You Think
Appellate courts do not conduct new fact-finding. They review the trial court’s application of law to an existing record. When an appellant tries to expand that record on appeal, it’s usually a sign of weakness—an admission that the original case wasn’t strong enough.
The SEC’s attempt to introduce new arguments suggests it knows the programmatic sales ruling is defensible on the existing record. If the Howey test applied clearly to secondary market XRP sales, the SEC wouldn’t need new facts to make its case.
This dynamic is familiar from traditional securities litigation. When an issuer gets summary judgment on a disclosure claim, you rarely see the plaintiff try to smuggle in new allegations on appeal. Courts don’t allow it, and it damages credibility. The same principle applies here.
The Second Circuit now reviews a cleaner record—one that reflects what the SEC actually argued at trial, not what it wishes it had argued. That’s bad news for the agency.
The SEC’s Dilemma
The SEC has spent three years litigating crypto cases without a coherent theory of when a token sale becomes a securities transaction. It won against Terraform Labs on algorithmic stablecoin fraud. It lost the programmatic sales question in Ripple. It settled with Binance on exchange operation violations but didn’t clarify token status.
The agency wants a bright-line rule: all token sales are securities offerings unless proven otherwise. But Torres rejected that framework, and the stricken portions of the SEC’s brief suggest the agency still hasn’t developed a workable alternative.
Compare this to equity markets. The Howey test works for stock because the buyer always expects profit from the efforts of management. Equity holders have governance rights, dividends, liquidation preferences—all tied to the issuer’s performance. The connection is direct.
Secondary market token sales are different. A retail buyer on Kraken purchasing XRP with USDT has no contractual relationship with Ripple. No governance rights. No dividend expectations. The purchase is speculative, not relational. That’s why Torres ruled it wasn’t a securities transaction.
If the SEC wanted to challenge that logic, it needed to build the factual record during discovery and summary judgment. It didn’t. Now it’s trying to relitigate on appeal, and the court isn’t allowing it.
What This Means for Other Cases
The SEC has active enforcement actions against Coinbase, Kraken, and several DeFi protocols. All involve the same question: when does a token sale trigger securities law?
If the Second Circuit affirms Torres on programmatic sales, the SEC’s enforcement strategy collapses. It can still pursue issuers for unregistered primary offerings—that part of the Ripple ruling went the SEC’s way. But it loses the ability to treat every secondary market token transaction as a securities trade.
That distinction matters. Exchanges can list tokens for spot trading without registering as securities exchanges, as long as the tokens themselves weren’t sold in unregistered primary offerings. DeFi protocols can operate without broker-dealer registration if they don’t facilitate primary issuance.
You end up with a framework that looks more like commodities regulation—primary issuance is tightly controlled, secondary trading is lightly regulated. The CFTC has been arguing for this model for years. A Second Circuit affirmance of Torres would effectively hand the CFTC the win.
The Institutional Angle
Sophisticated allocators have been waiting for clarity on secondary market token status before increasing exposure. Pension funds, endowments, and registered investment advisors can’t hold assets with ambiguous regulatory classification. It’s not about risk appetite—it’s about fiduciary duty and compliance infrastructure.
A clean Second Circuit ruling would remove that barrier. You’d see a wave of institutional products—not retail exchange tokens, but structured notes, total return swaps, and index funds that provide crypto exposure without direct token custody.
That’s what happened with Bitcoin after the ETF approvals. Institutional flows into spot Bitcoin products exceeded $15 billion in the first six months. A similar dynamic would follow for altcoins if the Ripple ruling stands.
But it depends on clarity. Institutions don’t trade legal ambiguity. They wait for definitive rulings, then move fast.
What to Watch
The Second Circuit will hear oral arguments in the coming months. The panel composition matters—some circuits are more deferential to agency interpretations, others more skeptical. The Second Circuit has historically been tough on the SEC when it overreaches.
Watch for amicus briefs. The Blockchain Association, Coinbase, and several DeFi advocacy groups have already signaled intent to file. If traditional finance groups—securities industry associations, broker-dealer lobbies—file in support of Ripple, that’s a signal the establishment thinks the SEC went too far.
Also watch the SEC’s response brief. If it tries to reframe the case again or introduce new arguments, that’s another sign of weakness. Strong appeals defend the trial court record. Weak ones try to escape it.
The Takeaway
The SEC’s attempt to introduce new arguments on appeal wasn’t a strategic refinement—it was a tacit admission that the original case wasn’t strong enough to win. When a federal agency loses a motion to strike its own appellate brief, it signals the court views the appeal with skepticism. If you’re building compliance infrastructure or allocating capital based on regulatory clarity, this is the signal you’ve been waiting for. The SEC’s theory of universal token regulation is on weaker ground than the agency wants to admit, and the market is starting to price that in.
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