- The SEC has cited SEC vs. Commonwealth Equity Services LLC to support its summary judgment motion.
- Ripple’s defense has always centered on fair notice defense under the Due Process Clause.
- Ripple’s legal team has argued that the cited case supports their position.
The legal battle between Ripple Labs and the US Securities and Exchange Commission (SEC) intensifies as both sides present their arguments. Recently, the SEC filed a letter of supplemental authority supporting its motion for summary judgment, citing a legal precedent set by the case SEC vs. Commonwealth Equity Services LLC.
Ripple’s Legal Team Argues Cited Case Supports Their Position
This case dealt with a violation of the Investment Advisers Act of 1940, where the court rejected a due process affirmative defense based on a lack of fair notice.
Ripple’s legal team responded to the SEC’s letter, arguing that the cited case supports their position, emphasizing the importance of fair notice in legal proceedings.
Ripple’s defense has always centered around the fair notice defense under the Due Process Clause of the US Constitution, which requires that the language of any criminal statute be clear enough to objectively give fair notice of what is prohibited.
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The SEC alleges that Ripple and two of its executives, Brad Garlinghouse and Chris Larsen, raised over $1.3 billion through an unregistered, ongoing digital asset securities offering. Ripple’s main defense is that the SEC failed to provide fair notice before filing the securities fraud lawsuit in December 2020.
Ripple’s Legal Team Makes Case Against SEC in XRP Dispute
In response, Ripple’s legal team highlighted the differences between the SEC vs. Commonwealth Equity Services LLC case and theirs.
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They argued that the SEC’s case lacked timely evidence on the fair notice defense, while Ripple has presented several documents from the regulator’s filings and communication with third parties and experts.
Ripple’s defense also emphasized that the threshold issue in their case is whether the Securities Act applies to their offers and sales of XRP.
They maintained that the SEC’s reference to an “unbroken chain of district court decisions rejecting fair notice defenses” is irrelevant, as the Court had already dismissed the SEC’s reliance on those cases.
Furthermore, Ripple’s legal team pointed out that the Commonwealth case rejected a fair notice defense on summary judgment, even when the SEC had been aware of the practices in question for over two decades and had not adopted rules addressing the specific conduct.
This, they argued, strengthens their argument that the SEC has not provided adequate notice to Ripple Labs regarding their disclosure obligations.
On the Flipside
- The SEC argues that Ripple had ample warning that their digital asset XRP could be considered a security and subject to regulation.
- The Commonwealth Equity Services LLC case is not a perfect legal precedent for either side, as it dealt with different circumstances and regulatory frameworks.
- While $1.3 billion is a significant amount of money, it is worth noting that the SEC has not alleged any wrongdoing by Ripple regarding how they used those funds.
Why You Should Care
The Fair Notice Defense is a pivotal issue in the Ripple vs. SEC case as it would clarify the standards that digital asset issuers must meet in terms of regulatory compliance, which is critical for the continued growth and adoption of cryptocurrencies.
Ripple’s defense has highlighted the importance of transparency and clarity in regulatory frameworks. The lack of clear guidelines and regulations in the digital asset space has created uncertainty and confusion for many companies and investors.
To learn more about the legal battle between Ripple Labs and the SEC and how we got to this point, read here:
Ripple vs. SEC Feud Intensifies: Court Rejects Fair Notice?
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