The United States Securities and Exchange Commission (SEC) has claimed that a recent court judgment weakens a key defense made by Ripple Labs in its ongoing legal battle with the regulator. In an April 11 letter to U.S. District Judge Analisa Torres, the SEC highlighted the judge’s opinion in a separate enforcement action it won against investment advisory firm Commonwealth Equity Services. The SEC argued that the longstanding Supreme Court precedent which gave rise to the Howey test provides Ripple Labs with fair notice as to what a security is, just as the precedent referred to in the Commonwealth case had. Ripple’s argument that the SEC had failed to provide it with fair notice before suing it for committing securities fraud in December 2020 is regarded as one of its key defenses. Legal experts such as John E Deaton believe Ripple Lab’s best chance lies in convincing the judge that XRP is not a security based on the Howey test.

(By LUKE HUIGSLOOT)