Ripple Labs has filed a notice of supplemental authority to bolster its stance in the enduring legal face-off with the Securities and Exchange Commission (SEC). This filing was made to the United States District Court for the Southern District of New York in response to the SEC’s motion seeking remedies and final judgment.
Ripple Uses Binance Ruling
The core of the defense leverages a recent ruling from the US District Court for the District of Columbia in the case of SEC v. Binance Holdings, Ltd., No. 1:23-cv-01599-ABJ-ZMF. The Binance decision, issued on June 28, 2024, partially granted and partially denied the SEC’s allegations that Binance engaged in sales of unregistered securities.
The court determined that the SEC did not present sufficient evidence to show that secondary market transactions involving BNB tokens on crypto exchanges qualified as securities transactions. Ripple cites this decision as a pivotal reference, arguing its relevance due to its analytical parallels with it’s own ongoing litigation.
In their detailed reference to the Binance ruling, Ripple’s legal team highlights a significant observation by the Binance court: “[I]ntangible digital assets do not fit neatly into the rubric set forth in the mere seven pages that comprise the Howey opinion.” This statement underscores a recurrent theme in digital asset regulation, pointing to the complex nature of applying traditional securities law to modern digital assets.
The court’s criticism of the SEC’s piecemeal litigation approach was also noted in the submission, stating, “Also, the agency’s decision to oversee this billion dollar industry through litigation – case by case, coin by coin, court after court – is probably not an efficient way to proceed, and it risks inconsistent results that may leave the relevant parties and their potential customers without clear guidance.” This reflects a broader criticism within the cryptocurrency industry regarding the SEC’s regulatory strategy.
Furthermore, Ripple argues for judicial clarity regarding the legality of XRP sales, which was emphasized as a critical outcome of the court’s previous summary judgment. “This observation supports Ripple’s argument that providing clarity on the legality of the different types of sales of XRP was the most significant aspect of the Court’s summary judgment decision,” the filing stated. Ripple contends that such clarity is vital not only for its operations but for the cryptocurrency market at large, stressing that regulatory clarity prior to the court’s ruling supported their position against severe penalties.
The filing also touches on the nature of the violations Ripple allegedly committed, arguing that the SEC’s inability to establish recklessness on Ripple’s part should mitigate the severity of any proposed remedies. “The lack of regulatory clarity prior to that ruling in turn supports Ripple’s position that the Court’s finding of a strict liability violation on some of Ripple’s sales – but far fewer than the SEC alleged were violations – does not reflect reckless disregard for the law,” the company’s lawyers argued.
This supplemental notice was submitted by Michael K. Kellogg of Kellogg, Hansen, Todd, Figel, & Frederick PLLC, and Debevoise & Plimpton LLP, serving as counsel for Ripple Labs Their submission not only seeks to counter the SEC’s latest motions but also to affirm the company’s broader arguments regarding the application of securities laws to cryptocurrency transactions—a focal point of legal, regulatory, and academic debate as digital assets continue to challenge traditional frameworks.
At press time, XRP traded at $0.47979.
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