Crypto investors, fellow crypto investors! Here are two new rulings regarding the Ripple labs lawsuit against the SEC. SEC’s motion for dismissal of Ripple’s fair-notice defense was denied by Judge Analisa Torres in the Southern New York District Court. Ripple CEO Brad Garlinghouse says that this ruling is a strike for Ripple. Ripple has been at odds with SEC over whether XRP (CRYPTO XRP) is security.
While this ruling was widely discussed by the crypto community, Judge Torres denied Ripple CEO Brad Garlinghouse’s motion to dismiss the case against him and Chris Larsen for allegedly aiding in the sale of unregistered securities (XRP).
What does this court decision mean?
Who is winning? Ripple has a strong argument to support its case, and this ruling could prove useful. It is not yet a win in the case, as this ruling is merely a procedural win. If the SEC wins, Garlinghouse or Larsen can be held responsible by the second ruling. Let me explain.
SEC filed a lawsuit against Ripple alleging that Ripple raised $1.3B through XRP, an unregistered digital assets securities offering without notifying regulators. Ripple could win the case if the company proves that XRP is not a securities law-related cryptocurrency. Ripple is currently working to resolve the issue, but it is still being litigated.
Ripple has won several procedural victories in the interim. The SEC has established procedures to allow any regulation to be implemented.
Ripple is fighting from two sides:
- Fair notice defense
- XRP is not considered a security.
What makes Ripple’s fair notice defense win?
Ripple contested in April 2021, that the SEC went down to show that it would be considering XRP distributions following securities law. Ripple was denied due process because the notice was not given. This defense was dismissed by the SEC. The SEC argued that Ripple’s CEO had reviewed the DAO report which states that decentralized autonomous organization tokens are securities. Moreover, since the inception of XRP, the SEC has enforced securities laws in the cryptocurrency sector.
Judge Torres denied the motion of SEC to dismiss the fair notice defense. She affirms that the defense is valid in the lawsuit. Ripple may be able to win the case if the judge accepts that the SEC did not provide proper notice. This case is significant for the crypto community as it could set the stage for future lawsuits against the SEC and cryptocurrencies.
Ripple executives are not dismissed by the judge
Judge Torres gave one ruling in favor of Ripple, but she also gave another in favor of the SEC. Garlinghouse and Larsen, Ripple executives, published a motion in April 2021 to expel demands that they were involved with the market of unregistered securities. This motion was rejected by the court. The court concludes that the SEC adequately alleges a violation of security law by the two executives. The commission must now prove it. The SEC does not have to prove that any individual defendant knew that XRP sales were in violation of securities laws. It must prove that the defendants were aware of the illegality of XRP and that they contributed to its success. Garlinghouse or Larsen will not be fined if Ripple wins. Ripple could be punished if they lose. This will not affect the argument that XRP can be considered a security. Ripple received another point in the court’s latest rulings.
Why should you care?
To avoid any repercussions, exchanges have been delisting XRP since the lawsuit was filed. The XRP price has fallen due to uncertainty surrounding the verdict. Ripple is losing customers. Since December 2020, the case has been ongoing. A regulatory crackdown has resulted in XRP’s price falling 58% from its April 2021 peak. Ripple expects that the case will be closed between August 26th and November 18. Other cryptocurrencies, which are also under the SEC’s radar, are also monitoring the verdict. Ripple could win the case and XRP prices could rise significantly, as well as other altcoins.