The SEC admitted it did not state a view on XRP’s “securities” status prior to the lawsuit.
Does it mean Ripple can double down on the fair notice defense?
YEREVAN (CoinChapter.com) – The US Securities and Exchange Commission (SEC) admitted to not deeming XRP (Ripple Lab’s native token) securities to any third party before filing the lawsuit, thus giving up one of the prosecution angles: the fair notice.
The law enforcement agency stated that they did not answer prior inquiries on the matter and “did not state a view one way or the other.” However, Jeremy Hogan, an attorney involved in the case, tweeted the document, offering his interpretations.
He answered some of the questions from his followers and rephrased the legal jargon into plain English. Attorney Hogan stated that “the SEC admits that it never told anyone that XRP was a security.”
The SEC filed the lawsuit against Ripple Labs in December 2020, charging the CEO Brad Garlinghouse and ex-CEO Chris Larsen with fraud. The agency claimed that Ripple illegally sold $1.3 billion worth of XRP tokens as unregistered securities and thus violated its US investment laws.
Fast forward to the current proceedings: Ripple has built its defense around several key aspects. The primary concern is the SEC’s determination to define XRP as “securities.” The difficulty of labeling whether XRP is a security or currency lies at the core of the lawsuit.
Another key aspect of the defense is the absence of the appropriate “fair notice.” Ripple claims that the governmental agency had not issued any notice before filing the lawsuit, thus not complying with the adequate procedure.
The document presented above proves that the SEC admitted to not discussing the issue before dispatching the lawsuit to Ripple Labs. In doing so, it forfeited one of the prosecution fronts, i.e., the fair notice.
In detail, the SEC vs. Ripple lawsuit sets an important precedent for the crypto community. Chairman Gary Gensler has already been vocal on his plans to investigate the DeFi sector more thoroughly. He has already sent a Wells notice to Coinbase, one of the largest crypto exchanges.
Mr. Gensler pointed out that DeFi projects, specifically those that reward participants with “valuable tokens or similar incentives,” could come under investigation, no matter how “decentralized” they say they are.
The end is still nowhere in sight. The blockchain startup claims that XRP cannot be deemed securities if Bitcoin and Ethereum aren’t. The court proceeding drag on while Ripple’s token hangs in the balance. However, the outcome of the SEC vs. Ripple lawsuit is a cornerstone for crypto regulation in the future.
The fact that the SEC admitted to the absence of fair notice might affect the proceedings. But it might also take a back seat as the agency works another prosecution angle. Ripple could also change their recent strategy of focusing on the “securities” issue and double down on the fair notice defense.
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