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Are SEC Members Bolstering Ripple’s Defense In XRP Lawsuit?

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San Francisco-based Ripple Labs has asked a court to take into consideration recent comments by Securities and Exchange Commission members Hester Peirce and Elad Roisman on a lack of regulatory clarity over crypto in an effort to block the agency’s attempt to throw out Ripple’s fair notice defense, according to a new legal filing.

Fast facts

  • In a letter to U.S. District Court Judge Analisa Torres, Ripple defense attorney Michael Kellogg referred to a July 14 statement by SEC commissioners Peirce and Roisman on the SEC’s enforcement action and settlement with Blotics, a UK-based company that operated the once-popular crypto website Coinschedule.com, which publicized initial coin offerings. The SEC earlier charged Blotics for unlawfully touting digital asset securities.
  • In their joint statement, the SEC commissioners expressed disappointment that the SEC’s settlement with Coinschedule “did not explain which digital assets touted by Coinschedule were securities, an omission which is symptomatic of our reluctance to provide additional guidance about how to determine whether a token is being sold as part of a securities offering or which tokens are securities.”
  • Citing their statement, Kellogg said the commissioners’ comments made it “even more clear that during the time relevant to this case, members of the public did not have fair notice of what the law requires.”
  • “Commissioners Peirce and Roisman have candidly explained that there is a ‘decided lack of clarity for market participants around the application of the securities laws to digital assets and their trading’; that the application of the Howey test to such assets ‘is not crystal clear,’” Kellogg added. “The only certainty [they] see is that people have questions about how to comply with the applicable laws and regulations.”
  • The SEC, which filed its lawsuit against Ripple in December 2020, is alleging that the San Francisco payments company’s sale of XRP was an unregistered securities offering worth more than US$1.38 billion. The SEC is seeking to dismiss one of Ripple’s core arguments — that the SEC failed to provide “fair notice” that XRP transactions violated the law or that the SEC would later claim XRP itself to be an investment contract.
  • James Filan, a defense lawyer and former federal prosecutor who frequently comments on developments in the SEC v. Ripple lawsuit, said in a tweet: “It will be interesting to see how the #SECGov tap dances in its responses to the defendants’ filings about the Peirce and Roisman statement in view of the obvious infighting at the highest level of the Commission. The SEC needs to put its house in order.”

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