In the ongoing legal battle between Ripple Labs and the US Securities and Exchange Commission (SEC), Ripple’s legal team has responded to the SEC’s letter of supplemental authority regarding the SEC’s motion for summary judgment. Defense lawyer and former Federal prosecutor James K Filan tweeted an image of the Ripple defendant’s response.
The SEC had cited the case of SEC vs. Commonwealth Equity Servs., LLC to demonstrate the violation of negligence-based provisions of the Investment Advisers Act of 1940 by the defendant, specifically related to disclosure failures. The court in this case had also dismissed the defendant’s argument of a due process affirmative defense on the grounds of a lack of fair notice.
However, Ripple’s response argues that the Commonwealth case actually supports their stance, as it highlights the significance of fair notice in legal proceedings. They believe that the lack of clarity in the SEC’s guidance regarding the classification of XRP as a security deprived Ripple of fair notice, thus making any charges against them unjustified.
The letter further argues that Ripple had enough fair notice to counter their constitutional defense, as the precedent set by the Supreme Court’s Howey case and its subsequent legal offspring provided sufficient guidance. However, Ripple’s legal team maintains that the SEC’s reliance on Howey as a source of fair notice is inadequate in this specific case.
Ripple’s legal team emphasizes that the court in the Commonwealth case rejected a fair notice defense, despite the SEC’s knowledge of the defendant’s practices for more than two decades and the absence of any specific rules addressing the conduct. Nevertheless, Ripple’s legal team believes that this supports their stance that the SEC failed to provide Ripple Labs with sufficient notice regarding their disclosure obligations.
This legal battle between Ripple Labs and the SEC could have a significant impact on the wider cryptocurrency market and the regulatory framework governing digital assets. It remains to be seen how the case will unfold and what the implications will be for the industry as a whole.