The US Securities and Exchange Commission (SEC) has provided a written response to Judge Analisa Torres, offering additional information to support its fair notice defense. This response comes after Ripple filed letters requesting more clarity on the matter. The SEC cited recent court rulings for providing further evidence for their stance. This letter was sent yesterday and addressed to Judge Analisa Torres.
Attorney James K. Filan, who has been closely monitoring the case, was present to share the SEC’s letter on Twitter, as is typically the case.
The SEC’s response to Ripple’s fair notice defense argues that the rule of lenity referred to in Bittner v. U.S. cannot be applied to the Ripple case. The SEC notes that the rule of lenity only applies to criminal cases, whereas the Ripple case is civil. Additionally, it points out that the rule of lenity does not remove liability for defendants.
However, even if the rule of lenity did apply to civil cases, the courts have never determined that the term “investment contract” is vague.
Related article: Coinbase Braces for a Potential Legal Showdown with the SEC: Should Coinbase Expect a Hand From Ripple?
Ripple had previously referred to the Supreme Court’s decision in Bittner v. U.S. in their initial letter of supplemental authority, where two justices relied on the rule of lenity to form their opinion. The rule of lenity states that judgments should be made to favor the defendant when the law is ambiguous. This context is important to understand the SEC’s response.
In response to Ripple’s recent letter that mentioned Judge Michael E. Wiles’ decision to reject the SEC’s objection to Binance.US’s acquisition of Voyager’s assets, the SEC clarified that the judge’s comments were specific to the bankruptcy case and did not imply that the SEC had not provided adequate guidance to the broader market participants. The SEC asserts that the judge never stated that the agency had failed to offer enough guidance to market participants in general.
Below is Fox business journalist Eleanor Terrett quoted section from the SEC report:
As expected, many members of the XRP community have shared their opinions on the SEC’s reply. One of them, Attorney Jeremy Hogan, agrees that the SEC’s arguments regarding the Bittner case are reasonable. However, he finds it ridiculous that the SEC denies Judge Wiles’ assertion that the cryptocurrency market is dealing with regulatory ambiguity.
It is relevant to note that Judge Willis disclosed his notes which stated:
“I also am aware that Voyager operated, and Binance.US currently operates, in a
regulatory environment that at best can be described as highly uncertain. There are firms that operate as cryptocurrency brokers or exchanges, and have done so for several years, without being subject to clear and well-defined regulatory requirements. Regulators themselves cannot seem to agree as to whether cryptocurrencies are commodities that may be subject to regulation by the CFTC, or whether they are securities that are subject to securities laws, or neither, or even on what criteria should be applied in making the decision. This uncertainty has persisted despite the fact that cryptocurrency exchanges have been around for a number of years.”
The XRP community has observed that the SEC emphasizes Ripple’s direct sales to the public as a violation of securities laws, which is a significant point of dispute in the case. This is noteworthy because, in earlier filings, the SEC contended that all XRP sales, including those made on secondary markets, were unregistered securities offerings. It is important to note that the SEC’s recent emphasis on Ripple’s direct sales to the public alone indicates a significant change in its legal stance.
Dizier Capital’s founder, Yassin Mobarak, claimed that the SEC’s emphasis on Ripple’s direct sales to the public is an indication that the agency is shifting its stance on XRP’s classification as a security.
As previously reported, the legal conflict between the blockchain payment firm and the market regulator concerns whether XRP is an unregistered security and if Ripple’s sale of XRP to fund their operations violated securities laws. This legal dispute has lasted over two years and is now awaiting a court decision.
Read more: Messari CEO Expresses Confidence in Ripple’s Ability to Win SEC Battle
