Quick take:
- Judge Analisa Torres will allow Ripple to use its ‘fair notice’ defense in the ongoing lawsuit by the SEC
- The ‘fair notice’ defense by Ripple is hinged on the fact that a trading platform had sort guidance from the SEC on whether XRP was a security before listing the digital asset
- The SEC did not provide guidance on this and had sought to have the defense dismissed in the ongoing case
The ongoing lawsuit by the SEC (Securities and Exchange Commission) against Ripple has made a huge stride in favor of the defendants as Judge Analisa Torres, has allowed the cross-border payments company to use its ‘fair notice’ defense with respect to XRP.
Judge Analisa Torres of the U.S. District Court for the Southern District of New York, denied the SEC’s motion to have ‘the fair notice’ defense struck off from the court proceedings.
According to the order by Judge Torres, ‘the SEC has not met its burden of showing that Ripple’s fair notice defense should be stricken at this time’.
The ‘fair notice’ defense by Ripple states that before XRP was listed on a digital asset exchange, representatives of the platform had sought clarity from the SEC as to whether the digital asset was a security.
According to Ripple, representatives of the trading platform met with the SEC in 2019 to discuss this issue. However, the SEC did not say whether the digital asset was a security. The platform then proceeded to list XRP.
Furthermore, the order by Judge Torres goes on to point out that ‘before the SEC filed the complaint in this action, XRP was listed on over 200 exchanges, billions of dollars in XRP was bought and sold each month, numerous market makers engaged in daily XRP transactions, Ripple’s ODL product was used by many customers, and XRP was used in third-party products, many of which were developed independently of Ripple’.
In a recent Tweeter thread, Ripple’s General Counsel, Stuart Alderoty, identified Judge Torres’ order as a victory for the company. He said:
Today’s order makes it clear there’s a serious question whether the SEC ever provided Ripple with fair notice that its distributions of XRP – since 2013 – would ever be prohibited under the securities law.
Good to see the Judge rejecting the SEC’s attempt to prevent Ripple from pursuing its fair notice defense. It’s even more imperative that the sun sets on the SEC’s “regulation by enforcement” approach.
Similarly, Ripple CEO, Brad Garlinghouse, commented that the order was a ‘huge win for Ripple’ and that he would have preferred that the lawsuit would have ended with Judge Torres’ comments on the fair notice defense.
Mr. Garlinghouse went on to state that ‘the SEC must now prove its claims’. He also expressed confidence that all the claims against Ripple, himself and Chris Larsen will ultimately be dismissed.