The SEC vs. Ripple Lawsuit Heats Up After Fair Notice Confusion

Ripple is in the spotlight again for its lengthy, ongoing cryptocurrency lawsuit with the Securities and Exchange Commission (SEC). This time, the court has ruled against a defendant claiming that the term “dealer” had no fair notice. Therefore, it would have less binding authority than the “investment contract” term.

Nevertheless, attorney Hogan quickly explained that it is the Commission’s fault and the burden is on them. Meanwhile, SEC has filed a letter of supplemental authority. This document should support its motion against Ripple’s fourth affirmative defense, the “fair notice” argument.

Ripple Invokes a Similar Precedent

The plaintiff invoked a 20 December 2021 ruling on a Northern District of Illinois in response to the Commission’s action. That ruling would deny the defendant’s motion to dismiss the SEC vs. Fife. In that case, the Fife defendants claimed they did not have fair notice of the SEC’s new interpretation of the statutory term “dealer.”

Despite Ripple’s contention, in the SEC vs. Fife case, the court sided with the Commission:

The standard against which the SEC seeks to measure defendants’ conduct is the statute itself, the language of which defendants and all others even arguably involved in securities transactions plainly have had notice.

Now, the SEC seeks to make the same argument against Ripple:

It is for the courts – not the parties – to determine whether particular conduct falls within the scope of the statute. Indeed, the court rejected the defendants’ fair notice defense at the motion to dismiss stage despite acknowledging that lack of “binding authority” constructing the term “dealer.” In Ripple’s case, binding authority constructing the term “investment contract” has existed since 1946.

Hogan Says the SEC Should Clear the Air

Currently, Ripple is preparing to answer SEC’s letter appropriately while the debate is still worthy of crypto news. Furthermore, the XRP community attorney, Jeremy Hogan, claims the litigations in the two cases are “completely different.”

On Twitter, he stated that the court’s ruling in the SEC vs. Fife case, the verdict “marginally helps the SEC’s position in its Motion to Strike Ripple’s Fair Notice Defense.”

For instance, the defendant tried to use the “Fair Notice” argument to dismiss the lawsuit entirely in that case. On the other hand, in the SEC vs. Ripple case, XRP’s parent company only seeks to clarify the terminology.

Hogan explained:

It was in a very different stage of litigation, and the standard is completely different than the SEC v. Ripple case. In the Ripple case, it’s the SEC that is trying to strike the affirmative defense of Fair Notice, and it has the high burden to meet. The general idea in modern courts is that the decision should be made after looking at the evidence unless there’s no “plausible” way of winning.

Furthermore, Hogan believes that Fife can still raise an affirmative defense later, and most likely, they will. For now, the burden is on the Commission, which is moving to strike a pleading. Therefore, Ripple will reply to the SEC’s letter and wait for the court’s ruling.

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The SEC vs. Ripple lawsuit started in December 2020 and has seen small victories on each side ever since. Despite the case attracting overwhelming attention, crypto exchanges still list XRP for swaps and trades. After all, the coin remains one of the most lasting and tradable assets in the crypto market.

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