Ripple Labs has filed a Notice of Supplemental Authority to bolster its position in its ongoing legal battle with the Securities and Exchange Commission (SEC). The filing was filed in the United States District Court for the Southern District of New York in response to the SEC’s request for relief and a final judgment.
Ripple uses Binance’s rule
The core of the defense is based on a recent ruling by the U.S. District Court for the District of Columbia in SEC v. Binance Holdings, Ltd., No. 1:23-cv-01599-ABJ-ZMF. The ruling, issued on June 28, 2024, partially granted and partially denied the SEC’s allegations that Binance engaged in unregistered securities sales.
The court held that the SEC had not presented sufficient evidence to establish that secondary market transactions involving BNB tokens on cryptocurrency exchanges qualify as securities transactions. Ripple cites this decision as a pivotal reference, arguing its importance because of the analytical similarities between it and its ongoing litigation.
In their detailed reference to the Binance ruling, Ripple’s legal team highlights an important observation from the Binance court: “Intangible digital assets do not fit neatly within the criteria set out in the seven pages of Howie’s opinion.” This statement underscores a recurring theme in digital asset regulation, pointing to the complex nature of applying traditional securities law to modern digital assets.
The report also noted the court’s criticism of the SEC’s piecemeal litigation approach, stating: “The SEC’s decision to oversee this billion-dollar industry through litigation—case by case, coin by coin, court by court—is probably not an effective way forward, and risks inconsistent outcomes that could leave stakeholders and their potential customers without clear guidance.” This reflects broader criticism within the cryptocurrency industry regarding the SEC’s regulatory strategy.
Furthermore, Ripple claims that judicial clarity regarding the legality of XRP sales, which was emphasized as a critical outcome of the court’s previous summary judgment, is essential. “This observation supports Ripple’s argument that providing clarity regarding the legality of different types of XRP sales was the most important aspect of the court’s summary judgment,” the filing states. Ripple argues that this clarity is vital not only to its operations but to the cryptocurrency market as a whole, asserting that regulatory clarity prior to the court’s ruling supports its position against severe penalties.
The lawsuit also addressed the nature of the alleged violations committed by Ripple, arguing that the SEC’s failure to prove recklessness on Ripple’s part would mitigate the severity of any proposed remedies. “The lack of regulatory clarity prior to this ruling in turn supports Ripple’s position that the court’s finding of strict liability violations for some of Ripple’s sales — but far less than the SEC alleged violations — does not reflect reckless disregard for the law,” the company’s lawyers alleged.
This supplemental notice was filed by Michael K. Kellogg of Kellogg, Hansen, Todd, Vigil & Frederick PLLC and DeBoys & Plimpton LLP, as counsel to Ripple Labs. Their filing seeks not only to address the SEC’s latest proposals, but also to underscore 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 the time of publishing this report, XRP was trading at $0.47979.
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