The filing drew significant criticism from the crypto community. Nevertheless, several arguments from the SEC reply brief will likely draw investor concern. Arguments from the SEC regarding post-complaint XRP sales to institutional investors and Ripple’s plans to launch a stablecoin are particularly noteworthy.
The SEC stated that pre-complaint ODL institutional sales violated US securities laws. Significantly, the SEC argued that Ripple’s stablecoin would be an unregistered security and in breach of US securities laws (once launched).
Jeremy Hogan of Hogan and Hogan had this to say about the reply brief,
“The Ripple v. SEC briefs are FINISHED! And I think the SEC went out with a whimper here. It didn’t even try to attack ODL sales, just noting that Ripple was trying to re-litigate the issue (which it is). And it brought nothing new on damages. Just waiting for The Judge now!”
With the reply brief filed, the parties and any third parties must complete some procedural steps. The courts will then decide on the penalty Ripple must pay for breaching Section 5 of the 1933 US Securities Act. One area of interest will be whether the courts consider XRP sales to non-US institutional investors.
The SEC’s opening and reply briefs did not distinguish between US and non-US sales. In Morrison vs. NAB, the US Supreme Court ruled the SEC only has jurisdiction over US-based sales. In the opposition brief, Ripple argued that most ODL business is outside the US.
