SEC warns Court that a Ripple win on Fair Notice defense would nullify Howie Test

Rick Steves

Earlier this week, Ripple filed a SurReply that argues that the “more than seventy” lawsuits brought by the SEC against cryptocurrency firms don’t serve as Fair Notice for Ripple Labs.

what to do when your biggest customer leaves

This SurReplay – made public on Twitter by attorney James K. Filan – responds to the Securities and Exchange Commission’s reply supporting its motion to strike Ripple’s fourth affirmative defense: lack of fair notice.

“In its Reply, the SEC relies on a report by Cornerstone Research, a private consulting firm, to argue for the first time that Ripple’s fair notice defense “fails” because, “[p]rior to suing Ripple, the SEC had already brought more than seventy cases that subjected other digital assets to the application of the federal securities laws.”

“The SEC asks this Court to take judicial notice of the “more than seventy cases” referenced in Appendix 1 of the report, which Cornerstone characterizes as “Cryptocurrency Enforcement Actions” — almost all of which the SEC never cited in its opening brief.”

“In any event, the SEC has mischaracterized the prior enforcement actions. If the Court were to consider the cases cited in the report, they support Ripple’s point that the enforcement action brought against it is unprecedented”, the document stated.

Attorney Jeremy Hogan, a lawyer siding with Ripple in this lawsuit, summed up the situation: “The SEC wants to argue that the 75 actions/lawsuits it brought against crypto companies the last 5-6 years somehow put Ripple on notice that XRP was a security.

“Very misleading. The Telegram, Kik, Paragon cases all involved an ICO in which sales were made to CREATE the ledger”, he said on Twitter.

Ripple never held an ICO because the XRP ledger was ALREADY in existence when Ripple was formed. So, prior lawsuits against companies that held ICOs do NOT tend to show that Ripple had Fair Notice that what it was doing was illegal. Ripple is making an important distinction here”, he continued.

Yesterday, the SEC fought back and responded to the defendant’s SurReply saying Ripple Labs’ argument is based on an incorrect characterization of the “fair notice” defense.

“Fair notice does not require such exact factual correspondence, and Ripple cites no case that suggests anything to the contrary”, the SEC stated, further citing a recent ruling (United States v. Zaslavskyi) rejecting criminal defendant’s contention that “the United States securities laws are unconstitutionally vague as applied to cryptocurrencies.

“Rather, the ‘abundance of caselaw interpreting and applying at all levels of judiciary, as well as related guidance issued by the SEC as to the scope of its regulatory authority and enforcement power, provide all the notice that is constitutionally required'”.

The SEC argued that giving in to the defendant’s fair notice argument would nullify the Howie Test and its progeny’s “flexible rather than…static principle” if a “fair notice defense can defeat any claim involving an investment product that is not identical to one previously deemed a security.

The Fair Notice affirmative defense is Ripple’s most important argument against the SEC’s accusations. The firm has called for a summary judgment on that defense. Attorney Jeremy Hogan has recently stated that if Ripple wins such judgment, the precedent “could save the industry from the SEC”.

The lawsuit between the SEC and Ripple is most likely ending in a pre-trial settlement. 96% of all SEC cases are settled before trial, of which 60% before litigation and 90% in discovery. Mr. Hogan has recently presented his view on what a settlement may look like. One of the main points is that it could bottleneck the flow of XRP.

Anyway, Ripple may still lose the lawsuit. CEO Brad Garlinghouse told CNN the firm is ready to march on without the XRP if it loses the legal battle against the US regulator.

In the meantime, the world keeps dealing with the emergency of the cryptocurrency ecosystem. El Salvador has just approved Bitcoin as legal tender, with unforeseen consequences.

In the United States, however, the American Bankers Association has just warned the Senate against central bank digital currencies, a much desired market for Ripple.

ABA said CBDC proponents take a “highlight reel” approach to describing CBDC, “cherry-picking all the perceived benefits, while downplaying the serious risks to consumers and our financial system.”

Read this next

Digital Assets

Embarking on a Digital Currency Journey

Imagine you’ve stumbled upon a treasure map, leading you to untold riches hidden in the vastness of the internet. Instead of gold coins and jewel-encrusted goblets, this treasure comes in the form of digital currencies, the modern-day loot coveted by many.

Reviews

Traders Union Experts Share The Trading Analyst Review For 2024

Navigating options trading in rapidly shifting markets poses a considerable challenge. This is where options trading alert services become invaluable. They aid traders in keeping abreast of evolving opportunities and market trends. In this assessment, Traders Union experts scrutinize The Trading Analyst alert service to ascertain its efficacy. 

Digital Assets

BlockDAG’s Presale Achieves $9.9M: Aiming For A 5000-Fold ROI As Cardano’s Price Rises And Fantom Launches Sonic

Explore Cardano’s surge, Sonic’s efficiency, and why BlockDAG’s growth makes it the top crypto choice. A deep dive into the future of blockchain investments.

Digital Assets

US, UK probe $20 billion Tether transfers tied to Russian exchange.

U.S. and UK authorities are investigating the movement of $20 billion in the USD-pegged stablecoin tether (USDT) through Moscow-based exchange Garantex.

Digital Assets

BlockDAG Presale Raises $9.9M as Batch 5 Nears Sell-Out Amid Bonk’s Fluctuating Trading Volume & Spell’s Bullish Price

Explore BONK’s trading volume, SPELL’s market shifts, and why BlockDAG’s 10,000 ROI makes it an ideal crypto for savvy investors in 2024.

Digital Assets

Bybit expands into Europe amid regulatory scrutiny

Dubai-based cryptocurrency exchange Bybit is expanding its operations in Europe after encountering regulatory challenges in Hong Kong.

Digital Assets

Cathie Wood’s sponsored Bitcoin ETF sees historic $200 million inflows

The ARK 21Shares Bitcoin ETF (ARKB), co-sponsored by Cathie Wood’s ARK Invest, registered historic inflows exceeding $200 million on Wednesday, signaling a robust appetite among investors for Bitcoin-centric investments.

Digital Assets

Sam Bankman-Fried might see his 25-year sentence halved

Sam Bankman-Fried, the founder of the failed cryptocurrency exchange FTX, was sentenced to 25 years in federal prison by a Manhattan court on Thursday. This comes after he was convicted of defrauding customers and investors, with Judge Lewis Kaplan highlighting the potential future risks posed by Bankman-Fried.

Technical Analysis

EURJPY Technical Analysis Report 28 March, 2024

EURJPY currency pair under the bearish pressure after the pair reversed down from the major resistance level 164.25, which also stopped the sharp weekly uptrend at the end of last year,

<