The ongoing legal war between Ripple Labs and the U.S. Securities and Exchange Commission (SEC) that began in 2020 has reached a critical point, with the SEC filing its final defense in the remediation phase of the lawsuit. This will certainly set a milestone for cryptocurrency regulation.
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ToggleSEC challenges Ripple’s defense
The SEC recently issued a forceful response to Ripple's addendum brief , in which Ripple argued that its actions in handling XRP were not reckless, a point the SEC strongly disputed.
Although the blockchain startup tried to refute "fair notice" (note: when the state wants to infringe on people's rights, due process, the injured people should be given proper notice in advance), this has been previously rejected by the court. The SEC still maintains that there is ongoing legal ambiguity over XRP’s legal status.
SEC: Ripple has not committed the same crime again, but that doesn’t mean it won’t happen in the future
According to the SEC, although Ripple has not committed any violations since the lawsuit began, the possibility of future violations remains.
The SEC criticized Ripple for trying to minimize its liability while touting its cooperation with regulators since the XRP initial coin offering in 2013. Ripple’s claims that it would restructure future XRP sales to comply with legal guidance were deemed misleading by the SEC, indicating that Ripple misunderstood the court order and its compliance requirements.
Questioning Ripple’s strategy doesn’t work
The SEC's defense also casts doubt on Ripple's claims about its sales tactics, particularly its claims about sales outside the United States and to accredited investors. These defenses were apparently abandoned at the summary sentencing stage.
Additionally, the SEC rejected Ripple’s claims that it made contractual adjustments to on-demand liquidity sales, arguing that these contracts still violated certain regulations.
SEC still advocates for injunction
The SEC filing advocates for an injunction against Ripple to prevent future legal violations, countering Ripple's optimism about its compliance and restructuring efforts. Regulators are skeptical that Ripple can fully comply with established legal standards.
Ripple responds to SEC criticism: self-destructive reputation
In contrast, Ripple’s legal chief Stuart Alderoty criticized the SEC’s approach, believing that it damaged the SEC’s reputation among international regulators with more developed cryptocurrency frameworks. Alderoty remains hopeful for a solution that would benefit Ripple.
Final verdict in September
As Ripple prepares to expand its operations in Japan through its partnership with HashKey DX, the crypto community is waiting with bated breath for a final verdict around September. This case will not only affect Ripple and XRP, but will also set a precedent for how cryptocurrencies are treated under U.S. securities laws.
