In the ongoing legal saga between the U.S. Securities and Exchange Commission (SEC) and blockchain firm Ripple Labs, the SEC has filed additional support for its pending Motion for Summary Judgment.
The regulatory body is drawing on a recent District of Massachusetts court ruling in the case of SEC v. Commonwealth Equity Services, LLC.
The court sided with the SEC, determining that the defendant had violated negligence-based provisions of the Investment Advisers Act of 1940 by failing to disclose certain conflicts of interest.
The SEC claims that the commonwealth's case bolsters its summary judgment motion in the Ripple case for a few key reasons.First, the Massachusetts court's ruling that established that Supreme Court precedents can provide fair notice aligns with the SEC's argument in the Ripple case.
The agency insists that the Howey case and its successors provided Ripple with enough fair notice to invalidate their constitutional defense.
Additionally, the SEC contends that the commonwealth case strengthens the chain of district court decisions that have dismissed fair notice defenses in SEC enforcement actions.
Notably, the Massachusetts court rejected a fair notice defense even when undisputed facts indicated that the SEC had been aware of the practices in question for over 20 years (yet had not adopted rules addressing that specific conduct).
Consequently, the SEC asserts that the commonwealth case offers more authority for dismissing Ripple's fair notice defense and granting the SEC's motion for summary judgment.
The outcome of this case could send shockwaves throughout the cryptocurrency industry since it may establish a precedent for how digital assets are classified and regulated in the United States.