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SEC Submits Final Response in Ripple Lawsuit, Stresses Need for Injunctions

SEC’s stance on Ripple’s future compliance risks

The SEC has responded to Ripple's defenses in their ongoing legal case, emphasizing the necessity of injunctions to prevent future violations, as Ripple counters with critiques of the SEC’s legal consistency.

Key takeaways:

  • The SEC remains wary of Ripple’s potential for future regulatory violations, advocating for the imposition of injunctions.
  • Ripple disputes the SEC’s claims, emphasizing its compliance efforts and critiquing the SEC’s approach to cryptocurrency regulation.
  • The outcome of this case could significantly influence the regulatory landscape for cryptocurrencies in the U.S.

In the ongoing legal battle between Ripple Labs and the United States Securities and Exchange Commission (SEC), the SEC has recently filed its final response during the lawsuit's remedies stage. This latest submission from the SEC counters Ripple’s claims that it acted without recklessness regarding the handling and sale of XRP. 

Despite Ripple's arguments against the necessity of an injunction based on their past behavior and the purported clarity of XRP's legal status—which the court has previously questioned—the SEC remains unconvinced of Ripple's commitment to full compliance moving forward.

Legal arguments and Ripple's defense

The SEC’s response highlights its skepticism about Ripple's future conduct, asserting that despite no violations since the lawsuit's initiation in 2020, the possibility of future breaches remains. The commission argues that Ripple’s recent behavioral changes and reassurances do not eliminate the potential for non-compliance, thus necessitating continued legal restraint. 

Ripple's portrayal of its adherence to legal guidance and restructuring of future XRP sales were also scrutinized by the SEC, which described these claims as misleading and indicative of Ripple's misunderstanding of the lawsuit’s implications.

Furthermore, the SEC dismissed Ripple’s defenses regarding its conduct of sales outside the U.S. and to accredited investors, noting that these points were not maintained during summary judgment. The SEC also refuted Ripple’s adjustments to contracts for on-demand liquidity sales, stating that these contracts still omitted specific restrictions previously identified as violations.

Response from Ripple and broader implications

Responding to the SEC’s stringent final reply, Ripple’s chief legal officer, Stuart Alderoty, criticized the SEC’s approach, suggesting that it reflects poorly on the commission’s reputation, especially in the eyes of international regulators familiar with more defined cryptocurrency licensing frameworks. Alderoty accused the SEC of inconsistent law application but expressed optimism about the resolution of the case, which is eagerly anticipated by the cryptocurrency community with a final judgment expected around September.

Additionally, Ripple is expanding its technological footprint by introducing XRPL enterprise solutions to the Japanese market, in partnership with Tokyo-based consulting firm HashKey DX. This move underscores Ripple's ongoing efforts to enhance its business model amidst legal challenges.