The XRP community eagerly awaits U.S. judge Analisa Torres’ decision on the lawsuit to establish if the crypto asset is a security after summary judgement motions, opposition, and responses were filed. Although the XRP community is hoping for a favourable decision from Judge Torres, other crypto stakeholders think Ripple will lose the lawsuit.
Ripple Will Lose, Says Chia Network COO
One of the crypto stakeholders that anticipates a loss in Ripple’s action against the Securities and Exchange Commission is Chia Network COO, Gene Hoffman. Hoffman recently tweeted that Ripple executives were warned that XRP constituted security by William Hinman, the former head of the SEC’s Division of Corporate Finance.
He urged the owners of XRP to get ready for “the post Ripple loss future” and tweeted a snapshot of the SEC’s assertion from the most recent summary judgment reply.
John Deaton, the founder of Crypto Law and a backer of Ripple, reacted to Hoffman’s assertion by promising to put it in the correct perspective using “facts.”
In June 2018, Deaton said Hinman declared ETH and Bitcoin non-security in a contentious speech. To discuss how XRP would be regulated, Ripple CEO Brad Garlinghouse and CTO David Schwartz met with Hinman and former SEC chair Jay Clayton two months later.
Further, he explained that on June 13, 2018, the day before Hinman made his contentious statement, SEC enforcement attorneys conducted a thorough investigation into XRP using the Howey test.
According to attorney Deaton, if the SEC had been certain that XRP constituted a security, Clayton and Hinman would have told Ripple executives. Deaton asserted that the organization failed to inform Garlinghouse and Schwartz that the SEC Enforcement lawyers had determined that XRP qualified as a security.
As Deaton notes, if the SEC had determined that XRP was a security, it would have recommended Ripple be subject to an enforcement action or a cease and desist letter. After determining that XRP was a security, he said that the SEC would not have tolerated Ripple executives selling “illegal securities” to the general public for more than a year.
Deaton Offers More Clarification
Deaton adds that the SEC would have provided the XRP document as part of the discovery process to give the securities authorities an advantage in the legal proceeding.
“If the 2018 XRP Memo had concluded XRP was clearly a security, the SEC would’ve turned it over in discovery just like it did the August 2018 meeting notes. If they concluded XRP was a security the SEC would’ve handed it over and argued it gave Ripple plenty of time to fix it.”
Additionally, according to lawyer Deaton, Hinman and Coinbase’s security counsel met to discuss the exchange’s plans to list XRP in January 2019.
However, the SEC did not object to Coinbase’s listing of XRP on its exchange and promotion of its widespread adoption on February 25, 2019.