Ripple vs. SEC Feud Intensifies: Court Rejects Fair Notice?

SEC cites Commonwealth case to potentially weaken Ripple’s defense in ongoing legal battle over disclosure obligations.

Brad Garlinghouse fighting Gary Gensler in a boxing match.
  • The SEC has backed its Motion for Summary Judgment against Ripple Labs in the legal battle.
  • The court dismissed Ripple’s defense of inadequate notice.
  • The SEC’s argument could weaken Ripple’s defense.

The legal battle between Ripple Labs and the U.S. Securities and Exchange Commission (SEC) continues to escalate, as the SEC has provided further backing for its Motion for Summary Judgment

The recent SEC letter references a prior case against Commonwealth Equity Services to assert that Ripple breached the Investment Advisers Act of 1940 by failing to disclose specific conflicts of interest.

Ripple’s Challenge to SEC Rejected by Court

What is particularly noteworthy is that the court rejected the defendant’s defense that the SEC did not provide sufficient notice of the disclosure obligations alleged in the complaint. The SEC argues that Ripple’s “fair notice” argument is similarly flawed to Commonwealth’s.

The SEC compares Ripple and Commonwealth since the latter also argued that a Supreme Court precedent about disclosure obligations, over five decades old, was inadequate to justify fair notice. However, the court ruled in favor of the SEC, stating that fair notice was provided.

By citing the Commonwealth Equity Services case, the SEC’s submission of additional support for its pending Motion for Summary Judgment could potentially weaken Ripple’s fair notice defense.

SEC Uses Commonwealth Court Decision to Bolster Case Against Ripple 

The SEC argues that the Commonwealth court’s decision supports its summary judgment motion in the Ripple lawsuit for three key reasons. 

  • The SEC argues that the Commonwealth court’s decision aligns with its stance in the Ripple lawsuit, recognizing that past Supreme Court cases can provide fair notice.
  • The Commonwealth case adds to the “unbroken chain of district court decisions rejecting fair notice defenses on summary judgment.”
  • The Commonwealth court rejected the defendant’s fair notice defense despite the SEC knowing the relevant practice for over two decades.

If the court agrees with the SEC’s stance, it could result in rejecting Ripple’s fair notice defense and accepting the SEC’s motion for summary judgment.

On the Flipside

  • The SEC’s approach to fair notice could be seen as too aggressive, as it seeks to hold Ripple liable for conduct that was not clearly illegal when it occurred.
  • The SEC’s interpretation of the Investment Advisers Act of 1940 is too broad. It could potentially encompass a wide range of activities that do not necessarily fall under the purview of the Act.
  • Ripple has maintained that it is not a security and, therefore, not subject to the SEC’s jurisdiction and has garnered support from industry experts who share this view.

Why You Should Care

The SEC’s citation of the Commonwealth Equity Services case to support its Motion for Summary Judgment could weaken Ripple’s defense and have broader implications for how the SEC enforces fair notice requirements for crypto firms.

FAQs

What is going on with the SEC and Ripple?

The SEC has filed a lawsuit against Ripple, alleging that the company violated securities laws by conducting an unregistered securities offering with its XRP cryptocurrency. Ripple has denied these allegations and is currently fighting the lawsuit in court.

Why does the SEC hate Ripple?

It’s not accurate to say that the SEC “hates” Ripple. The SEC’s role is to enforce securities laws and regulations to protect investors. The SEC’s lawsuit against Ripple is based on allegations that the company violated these laws by conducting an unregistered securities offering with its XRP cryptocurrency.

Is Ripple winning the SEC lawsuit?

It’s difficult to say who is “winning” the lawsuit at this point. The case is still ongoing, and both sides have presented arguments to the court. The SEC has recently filed additional support for its Motion for Summary Judgment, which could potentially weaken Ripple’s fair notice defense. However, the court has not yet made a ruling on the case.

To learn more about Hogan’s explanation of why Ripple’s XRP is not considered a security, check out this article:

Ripple XRP Not a Security Under SEC Howey Test, Says Lawyer Jeremy Hogan

And for the latest on Ripple’s collaboration with the Central Bank of Montenegro to develop a CBDC, read here:

Ripple to Develop CBDC with Central Bank of Montenegro

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Author
Kyle Calvert

Kyle Calvert is a cryptocurrency news reporter for DailyCoin, specializing in Ripple, stablecoins, as well as price and market analysis news. Before his current role, Kyle worked as a student researcher in the cryptocurrency industry, gaining an understanding of how digital currencies work, their potential uses, and their impact on the economy and society. He completed his Masters and Honors degrees in Blockchain Technology within Esports and Business and Event management within Esports at Staffordshire University.