The SEC case against Ripple is nearing its conclusion, and the latest developments are not looking good for the SEC. In a footnote to her recent decision shared by Ripple general counsel Stuart Alderoty, Judge Analisa Torres stressed the securities regulator’s inconsistent treatment of digital assets.
PSA for other crypto defendants– check out footnote 20 where the Court makes it clear that the SEC’s theories (other than to Institutional Sales) are potentially very much subject to a Fair Notice defense. 👀 pic.twitter.com/Pe5uI4iMgW
— Stuart Alderoty (@s_alderoty) July 14, 2023
The SEC has argued that Ripple’s XRP token is a security because it was sold to investors in a way that gave them the expectation of profits. However, Torres’ footnote points out that the SEC has not taken the same approach to other digital assets, such as Bitcoin and Ethereum.
Read Also: Ripple CTO David Schwartz Shares Likely Date For XRP Lawsuit Summary Judgment
For example, the SEC has not brought any enforcement actions against companies that have sold Bitcoin or Ethereum to investors. This suggests that the SEC’s definition of a security is inconsistent and that it is only targeting Ripple because it is a larger and more successful company.
The footnote is a major victory for Ripple, and it could have implications for other digital asset companies that are facing enforcement actions from the SEC. If other judges agree with Torres’ interpretation of the law, it could make it much more difficult for the SEC to be successful in cases against digital asset companies.
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Focus on Fair Notice and SEC’s Inconsistencies
One of the key issues in the Ripple case is the question of fair notice. Ripple has argued that the SEC did not give it adequate warning that XRP could be considered a security. This is important because it would mean that Ripple could not be held liable for violating securities laws since there is no regulatory clarity.
Torres’ footnote does not directly address the issue of fair notice. However, it does suggest that the SEC’s theories about sales outside of corporate sales are largely inconsistent when compared to past digital asset cases. This could be an indication that the judge is considering Ripple’s fair notice argument.
Ripple Executive: SEC’s Actions Based on Fair Notice
Ripple’s Chief Legal Officer, Stuart Alderoty, has said that he believes the judge’s footnote is a “bombshell” decision that could have a major impact on the case. He also said that the footnote suggests that the SEC’s actions against Ripple were based on a lack of fair notice.
Read Also: Lead Ripple Developer Explains Reason For the Surge in XRP Burn, As Over 247,000 Tokens Destroyed
Renowned Lawyer Comments: Could Be Bad News for SEC
Lawyer John Deaton, who has been providing detailed information about the case from the beginning, has also commented on the footnote. He said it could spell bad news for the SEC.
Deaton also said that the footnote could mean that a defendant can make a fair notice defense in front of a jury from now on.
John Deaton noted:
“Always read the footnotes. Exactly the point. So many lawyers were saying she rejected the fair notice defense. That is not true. She rejected its application to Institutional sales only. She said SEC enforcement actions in the past provided fair notice related to Institutional sales, but commented that prosecuting other sales (eg secondary sales on exchanges) is “potentially inconsistent” with prior cases. That implies a defendant can argue fair notice to a jury on. If other judges agree, that is bad news for the SEC.”
Always read the footnotes. Exactly the point. So many lawyers were saying she rejected the fair notice defense. That is not true. She rejected its application to Institutional sales only. She said SEC enforcement actions in the past provided fair notice related to Institutional… https://t.co/PLjCk868Rc
— John E Deaton (@JohnEDeaton1) July 14, 2023
The case is still in progress, and it is not yet clear how the judge will rule. However, the latest developments are not looking good for the SEC. The footnote in Torres’ decision suggests that the judge is sympathetic to Ripple’s fair notice argument, and it could have a major impact on the case.
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