- Ripple’s legal team argues SEC’s guidance on XRP classification deprived them of fair notice.
- The court in SEC vs. Commonwealth Equity Servs. rejected fair notice defense despite SEC’s knowledge.
Defense lawyer and former Federal prosecutor James K Filan tweeted an image of the Ripple defendant’s response to the SEC’s letter of supplemental authority regarding the SEC’s Motion for summary judgment.
As a reply to the letter, the legal team for Ripple has countered by referring to a court decision in the District of Massachusetts, SEC vs. Commonwealth Equity Servs., LLC. The SEC had cited this case 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.
According to Ripple’s response, they argue 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
Meanwhile, the letter 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 ongoing 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.