Ripple has filed a response to the SEC’s recent letter of supplemental authority.
Leading blockchain company Ripple has responded to the SEC’s opposition to its fair notice defense. Ripple’s response to the SEC’s recent supplemental authority letter was shared yesterday by seasoned United States defense lawyer James K. Filan.
#XRPCommunity #SECGov v. #Ripple #XRP The Ripple Defendants have filed their Response to the SEC’s Letter of Supplemental Authority regarding the SEC’s Motion for Summary Judgment. pic.twitter.com/SPWnzxhKxx
— James K. Filan 🇺🇸🇮🇪 (@FilanLaw) April 13, 2023
Recall that in the SEC’s letter, the agency argued that its case with Commonwealth Equity Service provides additional authority for rejecting Ripple’s fair notice defense.
Responding to this claim, Ripple said, in the Commonwealth case, the defendant did not provide any evidence to support its defense that market participants lacked fair notice requiring them to disclose economic conflict of interest. Instead, Commonwealth cited SEC’s guidance and presented an expert who asserted that the agency’s guidance did not require certain disclosures.
Commonwealth Case Is Different from Ripple’s
According to Ripple, the Commonwealth case the SEC relies on to dismiss its fair notice defense is different from the evidence available in the ongoing lawsuit.
“Here, by contrast, there is abundant evidence, including extensive factual evidence from the SEC’s own files and its communication with third parties, showing that reasonable market participants, trying to understand what the SEC would permit or prohibit, concluded that defendants’ offers and sales of XRP were not investment contracts and told the SEC so.”
Ripple asserts that abundant evidence shows that the Securities and Exchange Commission was aware of the “widespread regulatory confusion” in the crypto space.
The blockchain company also claimed that the evidence also shows that the SEC pushed this regulatory confusion by continuously “offering vague guidance that differed from the Howey Test.”
Furthermore, Ripple argued that it is irrelevant for the SEC to boast that the Commonwealth case adds to the “unbroken chain of district court decisions rejecting fair notice defenses on summary judgment in its enforcement actions.”
Per Ripple, the court has already rejected the regulator’s reliance on these cases because none of them dealt with the evidence it has cited in support of its summary judgment motion.
“The closest case, Upton, which the SEC excludes from its list because it is an appellate decision, is a binding precedent and ruled in favor of the defendants’ fair notice defense. The court should do the same, and Commonwealth does not change that,” it concluded.
Ripple’s Fair Notice Defense
Ripple’s response to the SEC further supports the company’s fair notice defense. Recall that Ripple filed a supplemental letter in support of its fair notice defense on March 4.
The defendants cited a recent Supreme Court ruling in Bittner v. US, where two justices in the majority, relied on the rule of lenity as a basis for their opinion. For context, the rule of lenity dictates that the court should rule in favor of the defendants whenever the rules are unclear.
Responding to Ripple’s argument, the SEC noted that the two Justices’ reliance on the rule of lenity has no significance to the defendant’s fair notice defense.
Meanwhile, the crypto community still expects the summary judgment, which attorney John Deaton believes might come at any time.
A Final Move?
As each day goes by, summary judgment in Ripple v. SEC keeps getting closer. According to attorney Deaton, the ruling might come on or before May 6th. Apparently, this could be Ripple’s legal team’s final submission in the case before Judge Torres rules.
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