The ongoing legal dispute between the United States Securities and Exchange Commission (SEC) and Ripple has taken another turn as the San Francisco-based blockchain company has countered the SEC’s argument regarding its fair notice defense strategy.

According to a document filed on April 13, Ripple insisted that the case cited by the SEC did not provide any grounds to dismiss the fair notice defense. The blockchain company also substantiated its claims that the securities regulator failed to give adequate notice concerning its disclosure obligations.

The SEC’s Letter of Supplementary Authority

On Monday, the SEC filed a letter of supplementary authority supporting its motion for summary judgment, citing a District of Massachusetts court opinion concerning a case against Commonwealth Equity Services LLC – SEC vs. Commonwealth.

In it, dated April 7, the judge ruled that the defendant violated the Investment Advisers Act of 1940 relating to disclosure failures and rejected a fair notice defense. The court acknowledged that a 50-year-old Supreme Court precedent for disclosure requirements was enough to provide fair notice in the case.

The financial regulator argued that in its case with Ripple, the Howey Test and its progeny provided sufficient fair notice to beat the defendant’s defense. The SEC stated that the judge in the Commonwealth case rejected the fair notice defense even when it was obvious that the agency had been aware of the platform’s practices for long and had not adopted any rules regarding that specific conduct.

Further, the SEC mentioned that the Commonwealth case added another link to an “unbroken chain of district court decisions rejecting fair notice defenses, on summary judgment, in SEC enforcement actions.”

Ripple Responds

In response, Ripple argued that the defendant in the Commonwealth case failed to provide sufficient evidence on the fair notice defense, as they merely cited SEC guidance and presented a paid expert witness.

However, in its case, the blockchain company insisted that there was abundant evidence, including the SEC’s files and the agency’s communications with third parties, which concluded that the offer and sale of XRP tokens were not investment contracts.

Meanwhile, Ripple called the SEC’s boast of an unbroken chain of district court decisions rejecting fair notice defenses irrelevant, as none of the previous cases on the chain dealt with XRP or the facts presented.