Ripple had fair notice, and is using an incorrect characterization of the law to win lawsuit: SEC says

  • In the latest filing, the SEC has replied to a RIpple motion that claimed it didn’t have fair notice, with the regulator claiming Ripple is misinterpreting the law to win the case.
  • Ripple had moved to strike out an argument by the SEC in which the regulator claimed that the firm should have taken a cue from the 70+ other lawsuits it brought against other crypto companies.

The U.S Securities and Exchange Commission has responded to Ripple’s latest defense and in its latest filing, it has accused the company of misinterpreting the law to win the legal battle. Ripple had claimed that it lacked fair notice that the SEC would consider XRP a security. However, the SEC is claiming that the 70+ other lawsuits it brought against other crypto companies should have been enough to alert Ripple that XRP is a security.

The battle for fair notice

Ripple’s chances of victory in the legal showdown are firmly etched in its ability to claim a lack of fair notice. This defense tactic relies on convincing the court that the regulator failed in its duty to let Ripple know that it was committing securities violations.

However, the SEC has countered this defense by claiming that the over 70 other lawsuits it brought against other crypto companies were enough to let Ripple know it was on the wrong.

In Ripple’s last filing, it claimed that its case is unique and nothing like the 75 other lawsuits the SEC undertook. Its lawyers stated:

This is the very first case in which the SEC has ever brought an enforcement action against a company or its individual executives for selling or distributing an established digital asset alleging that Section 5 of the Securities Act required registration of such sales.

The SEC wants the court to strike out this defense. In a response to Ripple’s Sur-Reply, the SEC claimed that Ripple is deliberately misinterpreting the law.

RELATED: If Ripple eventually agrees to a settlement with the SEC, what would it look like?

The regulator states:

This argument is based on an incorrect characterization of the “fair notice” defense. Ripple’s argument boils down to this: because none of the SEC’s prior digital asset cases involve the exact, identical facts to this case, Ripple lacked sufficient fair notice, such that it cannot be liable for violating Section 5’s strict liability provisions.

In its one-page response to Judge Analisa Torres, the watchdog adds, “But fair notice does not require such exact factual correspondence, and RIpple cites no case that suggests anything to the contrary.”

The SEC believes that previous cases, such as the famous Howey lawsuit – upon which the Howey test for whether an asset is a security is based – provide sufficient notice. It further claimed that it has provided sufficient “related guidance as to the scope of its regulatory authority and enforcement power.”

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