Both US SEC and Ripple Motions Denied, Fight Continues

Judge Analisa Torres of the Southern District of New York issued two rulings on Friday regarding motions in the U.S. Securities and Exchange Commission (SEC) lawsuit against Ripple Labs.

Ripple said it did not receive fair notice from the U.S. SEC that it considered XRP a security, denying the company due process. Judge Torres denied the SEC's motion to dismiss this defense, filed last April, and by doing so, affirmed that the defense was viable in the lawsuit—in other words, if accepted, it could be used to to win this lawsuit.

The judge also denied a motion filed last April by Ripple CEO Brad Garlington and executive chairman Chris Larsen to dismiss charges that they aided and abetted the sale of unregistered securities. In filing the motion, the two defendants asserted that even if the allegations in the lawsuit were true, they would not constitute a winnable case.

While Garlington on Saturday called the dismissal of the SEC motion a "big victory," the case is still at the pleadings stage, so there could be more legal action in the future. Since Friday’s ruling, Ripple has produced a supplementary report refuting an expert report on XRP’s market performance.

If you weren't paying attention then, you should be paying attention now. Ripple had a huge win today!

— Brad Garlinghouse (@bgarlinghouse) March 11, 2022

The US SEC filed a lawsuit in December 2020 alleging that Ripple sold its XRP tokens as investment products between 2013 and December 2020 without registering with the US SEC. Ripple argues that XRP is “a digital asset for global real-time payments” that is not subject to the jurisdiction of the US SEC.

The case is noteworthy because, so far, it is the rare case brought by the U.S. SEC to go to trial rather than settle out of court. If no settlement is reached, the outcome of the case could set a precedent that could influence cases against crypto companies for the foreseeable future and could encourage more companies to challenge regulators in court.

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