Ripple Shatters SEC’s Argument In Response Letter


In just two days, Ripple filed its response to the U.S. Securities and Exchange Commission’s (SEC) Letter of Supplemental Authority. The SEC filed its letter on Monday in support of its motion for summary judgment, Bitcoinist reported.

The US authority brought forth a Massachusetts District Court opinion in the case against Commonwealth Equity Services LLC, dated April 07, 2023. According to the SEC, the decision confirms that the Howey test does not require a separate fair notice to Ripple.

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The judge in SEC vs. Commonwealth acknowledged that a 50-year-old Supreme Court precedent regarding disclosure requirements is sufficient to justify fair notice (in this case).

Ripple Shatters SEC’s Argument

In the reply letter, Ripple details why the Commonwealth case does not provide “additional authority” for the SEC to reject the fair notice defense. And the differences from the Commonwealth case are obvious as to why Ripple’s defenders are shattering the SEC’s arguments.

First, unlike Ripple, Commonwealth did not present any timely evidence on the fair notice defense. The broker merely cited SEC guidance and presented a paid expert witness.

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Ripple, on the other hand, presented a plethora of evidence from the SEC’s own filings and its communications with third parties. These show that reasonable market participants who sought to understand what the SEC would permit or prohibit considered XRP not to be an “investment contract.”

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Moreover, it was not disputed in Commonwealth that the Investment Advisers Act applied to the defendant’s conduct and required it to disclose economic conflicts of interest. In Ripple’s case, it is questionable whether the Securities Act applies at all. Therefore, the CEO Garlinghouse and his company counter the SEC:

The SEC’s boast of the ‘unbroken chain of district court decisions’ rejecting fair notice defenses, on summary judgment, in SEC enforcement actions” is irrelevant. The Court has already rejected the SEC’s reliance on these cases.

As the blockchain company points out, the two cases are not comparable. The closest case, according to Ripple, is the Upton case, which the SEC excludes from its list because it is an appellate decision. Hence, the letter concludes:

[The case] is binding precedent, and ruled in favor of the defendant’s fair notice defense. This Court should do the same, and Commonwealth does not change that.

XRP Community attorney Bill Morgan agrees with the reasoning and stated:

Ripple reminding Judge Torres the Upton case in which the Defendant’s fair notice defense was allowed is binding precedent but the recent case the SEC relies on isn’t and is totally different on the facts and evidence anyway.

Thanks to the quick response, one concern of the XRP community is also likely to prove unfounded: Due to Ripple’s quick response letter, there should probably be no delay in the summary judgment.

At press time, the XRP price traded at $0.5376, up 6,2% in the last 24 hours.

XRP price, 2-hour chart | Source: XRPUSD on

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Author: Jake Simmons

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