The US Securities and Exchange Commission (SEC) has made a move in its ongoing legal battle against Ripple Labs. In a letter dated April 11, the SEC refers to a previous enforcement action it won against an investment advisory firm, Commonwealth Equity Services, citing the opinion of US District Judge Analisa Torres, who is overseeing the Ripple case.
The letter is part of the SEC’s efforts to refute Ripple’s claim that the regulator failed to provide fair notice that its sales of XRP tokens were illegal. The SEC argues that the Commonwealth case is relevant because it shows that the agency has consistently taken the position that digital assets like XRP are securities.
The SEC’s letter states that Judge Torres found in the Commonwealth case that the investment firm violated securities laws by failing to register certain securities transactions. The judge also rejected the firm’s argument that it lacked fair notice that its actions were illegal, stating that “the law does not require the SEC to provide defendants with a crystal ball to identify every possible way in which a securities law may apply to a transaction.”
The SEC’s reference to the Commonwealth case is significant because it undermines Ripple’s argument that it lacked fair notice that its sales of XRP were illegal. Ripple has claimed that it relied on legal advice from its lawyers that XRP was not a security and that the SEC failed to provide clear guidance on the issue.
The SEC’s letter also argues that Ripple’s reliance on legal advice is not a defense against the agency’s claims. The SEC states that “defendants cannot rely on advice of counsel as a defense to scienter-based claims” and that Ripple’s executives were aware that their sales of XRP were illegal.
The SEC’s case against Ripple has been closely watched by the cryptocurrency industry, as it could have implications for how digital assets are regulated in the US. The SEC has taken the position that many digital assets are securities and subject to its oversight, while many in the industry argue that some tokens should be considered commodities or currencies.
The SEC filed its lawsuit against Ripple Labs in December, alleging that the company and its executives sold $1.3 billion worth of XRP tokens in unregistered securities offerings. Ripple has denied the allegations and has vowed to fight the case in court.
The case is being closely watched by the cryptocurrency industry, as it could have implications for how digital assets are regulated in the US. The SEC has taken the position that many digital assets are securities and subject to its oversight, while many in the industry argue that some tokens should be considered commodities or currencies.
In response to the SEC’s letter, Ripple’s lawyers filed a letter with Judge Torres on April 12, arguing that the SEC’s reference to the Commonwealth case is “irrelevant and inapposite” to the issues in the Ripple case. Ripple’s lawyers argued that the Commonwealth case involved different facts and legal issues and that the SEC’s reliance on it was an attempt to “bolster its weak case.”
The legal battle between Ripple and the SEC is likely to continue for some time, as both sides are firmly entrenched in their positions. The outcome of the case could have significant implications for the cryptocurrency industry, as it could provide clarity on how digital assets are regulated in the US.
In the meantime, Ripple’s XRP token has been delisted from several major cryptocurrency exchanges, including Coinbase and Binance US, as a result of the SEC’s lawsuit. The delistings have had a significant impact on the value of XRP, which has fallen sharply since the lawsuit was filed.
Despite the setbacks, Ripple has continued to develop its technology and expand its partnerships with banks and financial institutions around the world. The company recently announced a new partnership with Tranglo, a cross-border payment firm based in Asia, which will use Ripple’s technology to facilitate faster and cheaper payments.
As the legal battle between Ripple and the SEC continues, the cryptocurrency industry will be watching closely to see how the case unfolds and what implications it may have for the future of digital assets in the US.