A new court ruling could shake the foundation of Ripple Labs’ pivotal defense in its high-stakes legal showdown with the United States Securities and Exchange Commission (SEC), as the regulator points out.

According to an article published by Cointelegraph earlier today, in a letter to U.S. District Judge Analisa Torres, who presides over the case between the SEC and Ripple Labs, the SEC emphasized the judge’s opinion in a separate enforcement action that it had won against investment advisory firm Commonwealth Equity Services.

The ruling in the Commonwealth case determined that a long-established court precedent offers sufficient “fair notice.” The SEC contends that the longstanding Supreme Court precedent that led to the development of the Howey test, which is used to identify securities, provides Ripple Labs with adequate notice regarding what constitutes a security. Moreover, the SEC claims that its case against Commonwealth lends “additional authority” to the dismissal of Ripple’s fair notice defense.

One of Ripple’s main defenses is the argument that the SEC did not provide fair notice before filing a securities fraud lawsuit against the company in December 2020. While some industry watchers, such as crypto exchange Coinbase, are confident in this defense, legal experts like John E Deaton hold a different perspective.

Deaton has previously pointed out that the fair notice defense is only applicable if the judge rules that Ripple’s XRP token was a security at any time between 2013 and the present day. Deaton argued back in July 2022 that Ripple Labs’ most promising strategy is to convince the judge that XRP does not qualify as a security under the Howey test.