Last updated on May 18th, 2024 at 12:19 pm
In the ongoing legal battle between Ripple Labs and the U.S. Securities and Exchange Commission (SEC), the SEC has filed its final reply in the lawsuit’s remedies phase. This development is crucial as it marks a significant step toward resolving the dispute concerning Ripple’s cryptocurrency, XRP.
SEC Challenges Ripple’s Defense
The SEC has firmly countered Ripple’s claim that its actions surrounding the XRP token were not reckless. Despite Ripple’s defense that there should be no “widespread uncertainty” regarding XRP’s legal status, the SEC points to the court’s rejection of Ripple’s “fair notice” defense as a basis for continued scrutiny. The SEC argues that just because Ripple has not committed further violations since the lawsuit began in 2020, it does not eliminate the potential for future breaches.
Further emphasizing its position, the SEC contends that Ripple’s recent behavioral changes and promises of compliance are insufficient grounds to forego judicial injunctions. The agency maintains that Ripple’s restructuring of XRP sales and its adherence to legal guidance are misinterpretations of the court’s orders, suggesting a continued risk of non-compliance.
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XRP’s Position and Response
Conversely, Ripple has attempted to minimize its liability by highlighting its cooperative stance with the SEC since the 2013 initial coin offering of XRP. Ripple argues that its subsequent business modifications and sales practices, particularly those involving sales outside the U.S. and to accredited investors, have strictly complied with regulatory expectations. However, the SEC dismisses these defenses as irrelevant, pointing out that they were dropped during the summary judgment phase.
Ripple’s Chief Legal Officer, Stuart Alderoty, criticized the SEC’s approach, likening it to an overly punitive stance that may be out of step with international regulatory norms. Alderoty expressed hope for a favorable resolution in the case, noting the potential surprise among global regulators at the SEC’s rigid interpretation of its regulatory role.
And just when you think the SEC can’t sink any lower, if you are a financial regulator outside the U.S. and have done the hard work of establishing comprehensive crypto licensing frameworks, know that the SEC has no respect for you and thinks you are handing out the equivalent of… pic.twitter.com/7qZQIkyrH4
— Stuart Alderoty (@s_alderoty) May 7, 2024
The financial market and cryptocurrency enthusiasts are closely watching the outcome of this case, anticipating its implications for future regulatory actions against crypto assets in the United States. A decision around September could set a precedent for how cryptocurrencies are treated under U.S. securities law.
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