Southern New York District Court Judge Analisa Torres issued two rulings Friday on motions filed in the Security and Exchange Commission (SEC) lawsuit against Ripple Labs.
Ripple argued that it was not given fair notice by the agency that it would consider the token a security, thus denying the company due process. Judge Torres denied the SEC motion, filed in April, to dismiss this defense, and by doing so affirmed that the defense is viable in the suit — in other words, that the defense, if accepted, could be used to win the case.
The judge also denied a motion filed by Ripple CEO Brad Garlington and executive chairman Chris Larsen in April to dismiss the case against them for aiding and abetting the alleged unregistered securities sales. By filing the motion, the defendants claimed that, even if the allegations in the suit were true, they would not comprise a winnable case.
While Garlington hailed the rejection of the SEC motion as a “huge win” on Saturday, the case is still in the pleadings stage, so there are likely to be many more legal maneuvers to come. Since the decisions Friday, Ripple has moved to strike a supplemental report rebutting an expert report on the market performance of XRP.
If you weren’t paying attention then, you should be now. Huge win for Ripple today! https://t.co/dMeUQuIPHM
— Brad Garlinghouse (@bgarlinghouse) March 11, 2022
The suit alleged Ripple sold its XRP token as an investment product without SEC registration from 2013 to December 2020, when the agency filed suit. Ripple has argued that XRP is “a digital asset for real-time global payments,” and not subject to SEC jurisdiction
The case is noteworthy because it is, so far, a rare instance of a case brought by the SEC that goes to trial, rather than being settled out of court. The outcome of the case, if no settlement is reached, could set a precedent that would affect cases against crypto companies for the foreseeable future, and could encourage more companies to challenge the regulator in court.