Ripple Labs' 'fair notice' defense undermined by SEC in light of recent court case

2023-04-13

Summary:
  • The SEC supports its motion for summary judgment against Ripple Labs by citing a separate court case it won.
  • A court judgment weakens Ripple Labs' defense in its legal battle with the SEC.
  • The SEC argued that the Howey test provides Ripple Labs with fair notice as to what a security is, just like the precedent referred to in the Commonwealth case.
  • Ripple's fair notice defense is a key defense against the SEC's lawsuit.
  • Ripple Lab's best chance lies in convincing the judge that XRP is not a security based on the Howey test.


Full article:

The SEC filed a letter to further support its motion for summary judgment against Ripple Labs, citing a separate court case it had recently won.

A recent court judgment further weakens a key defense made by technology firm Ripple Labs in its ongoing legal battle with the United States Securities and Exchange Commission (SEC), the regulator has claimed to a federal judge.

In an April 11 letter to U.S. District Judge Analisa Torres, who is overseeing the SEC and Ripple Labs case, the SEC highlighted the judge’s opinion in a separate enforcement action it won against investment advisory firm Commonwealth Equity Services.

In that case, it was deemed that a longstanding court precedent provides sufficient “fair notice.”

The SEC argued that the longstanding Supreme Court precedent which gave rise to the Howey test — which is used to determine what constitutes a security — provides Ripple Labs with fair notice as to what a security is, just as the precedent referred to in the Commonwealth case had.

The SEC added its case with Commonwealth provides “additional authority” for rejecting Ripple’s fair notice defense.

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Ripple’s argument that the SEC had failed to provide it with fair notice before suing it for committing securities fraud in December 2020 is regarded as one of its key defenses.

While many observers such as crypto exchange Coinbase believe the defense to be a winner, legal experts such as John E Deaton have a different opinion.

Deaton has previously noted that the fair notice defense only comes into play if the judge decides Ripple’s XRP (XRP) token was a security at any time between 2013 to now. Deaton believes Ripple Lab’s best chance lies in convincing the judge that XRP is not a security based on the Howey test.

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Source: cointelegraph.com

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