The U.S. Securities and Exchange Commission (SEC) has formally filed an appeal against a recent court decision that curtails its regulatory authority over the cryptocurrency market.

The SEC's appeal follows a district court ruling that restricted the agency’s ability to regulate certain cryptocurrency-related products. In July 2023, the court determined that XRP tokens, sold by Ripple Labs on public exchanges, did not meet the legal criteria of a security. As a result, XRP sales were not subject to the investor protection laws the SEC sought to enforce.

The ruling was a significant setback for the SEC, which had attempted to extend traditional securities laws to digital tokens that don’t align with the established definition of a security. This decision hindered the agency’s efforts to assert greater oversight in the crypto space, which it views as vulnerable to fraud, investor risks, and market manipulation.

In its appeal, the SEC argues that the lower court's ruling undermines its mission to safeguard investors and uphold fair markets. The commission maintains that many cryptocurrencies, despite their innovative form, operate as securities and should fall under federal regulation. SEC Chair Gary Gensler has consistently emphasized the need for stronger regulatory measures around cryptocurrencies, asserting that most digital tokens qualify as investment contracts under U.S. law.

If the appellate court upholds the district court’s decision, it could limit the SEC’s ability to regulate cryptocurrency exchanges like Coinbase and other entities that create or trade new financial products.