The Securities and Exchange Commission (SEC) has submitted its remedies reply brief in its ongoing legal battle with Ripple Labs, accompanied by supporting exhibits. This filing marks a pivotal moment in the litigation as it is the final brief before Judge Torres will make her remedies ruling.

Pro-XRP lawyer Bill Morgan provided a comprehensive breakdown of the SEC’s final brief via X, highlighting the nuances of the legal arguments and the potential ramifications for Ripple and its operations. One of the main points of contention remains the issue of financial harm to institutional buyers of XRP.

The SEC maintains that financial harm should include not only direct losses but also missed opportunities for greater profits due to less favorable terms in the purchase of XRP. Morgan noted, “The SEC reply brief does not add anything new to the argument about financial harm.” He added skepticism about the likelihood of disgorgement, stating, “I do not think disgorgement will be ordered but the outcome is not obvious.”

Additionally, the SEC’s reply brief strongly advocates for a permanent injunction that would restrict Ripple’s future sales of XRP, particularly to its On-Demand Liquidity (ODL) customers. According to Morgan, “The SEC argues that an injunction should be granted because Ripple’s business is almost currently almost entirely the sale of XRP to institutions.”

Furthermore, the SEC asserts that Ripple has abandoned several defenses it previously claimed, such as the extra-territoriality of its sales to accredited investors, particularly in relation to institutional transactions. This, according to the SEC, indicates a strategic retreat by Ripple in the face of unfavorable legal analysis and precedents.

In response to the SEC’s filing, Ripple’s Chief Legal Officer, Stuart Alderoty, expressed strong dissent, criticizing the SEC for its approach: “More of the same from the SEC — failing to faithfully apply the law and trying to pull the wool over the Judge’s eyes.” He continued, “The good news is that we are closer than ever to putting this lawsuit behind us, though unfortunately, many are just starting the journey. We trust the Court will approach the remedies phase fairly.”

Alderoty also made a pointed critique of the SEC’s respect for international regulatory frameworks: “And just when you think the SEC can’t sink any lower, if you are a financial regulator outside the US and have done the hard work of establishing comprehensive crypto licensing frameworks, know that the SEC has no respect for you and thinks you are handing out the equivalent of fishing licenses.”

More of the same from the SEC — failing to faithfully apply the law and trying to pull the wool over the Judge’s eyes. The good news is that we are closer than ever to putting this lawsuit behind us, though unfortunately, many are just starting the journey. We trust the Court… https://t.co/JGhxAtOuk1

— Stuart Alderoty (@s_alderoty) May 7, 2024

Financially, the stakes are high. The SEC is pursuing fines and penalties that could total around $2 billion, highlighting the severity with which it views the alleged regulatory violations. Ripple, countering this, has proposed a maximum penalty of just $10 million, arguing that the SEC’s demands are disproportionately high compared to penalties imposed in similar cases.

Ripple contends that it has instituted significant changes to its XRP institutional sale practices to prevent future infractions, signaling its willingness to comply with regulatory norms while challenging what it perceives as excessive punitive measures. Moreover, the company argues that it didn’t cause monetary losses to institutional investors.

At press time, XRP traded at $0.5218.

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