Could Ripple Win the SEC Lawsuit? Attorney Deaton Explains


Several XRP community members have started making predictions about the outcome of the current lawsuit between the SEC and Ripple as it approaches its conclusion. While some XRP supporters think Ripple might win the Securities and Exchange Commission’s lawsuit outright, others predict the blockchain firm could lose.

In a Twitter conversation from yesterday, an XRP enthusiast going by the Twitter handle @JayVTheGreat led those who thought Ripple would lose by asserting that the XRP transactions made by Ripple are securities. Because the blockchain startup “did not put forward a good argument against anything but the Blue Sky laws,” he expressed confidence that Ripple would lose.

Read also: German Venture Capital Firm Invests in Ripple Ahead of IPO

Deaton’s Predictions: Reasons Behind

In Deaton’s opinion, Judge Torres might avoid Ripple’s XRP sales because the SEC did not apply the Howey Test to every transaction. The regulator argued that “XRP itself is a security” instead.

“Essentially, the SEC is applying the old “But For” causation test in this case. The SEC argues that for Ripple executives (Jed, Chris) creating XRP, XRP wouldn’t exist. But for Ripple helping create a secondary market for XRP, a secondary market wouldn’t exist,” attorney Deaton stated.

The SEC also claims that all recent and historical XRP sales constitute securities. According to the regulator, XRP can only be regarded as securities internationally only because of Ripple’s work, Deaton said, adding:

Deaton said that Judge Torres might give Ripple an absolute victory by dismissing the SEC’s broad accusations because the regulator failed to provide evidence of a specific transaction.

“In other words, if El Salvador would have made XRP legal tender like it did w/BTC, the SEC is claiming it would all be due to Ripple’s past, present, and future efforts. It is an extraordinarily all-encompassing theory. But that’s not how securities laws get applied.”

Read more: Ripple vs. SEC: The Cryptocurrency Trial of the Century

Deaton Blasts SEC’s Common Enterprise Argument

The XRP community attorney criticized the SEC for “being all over the place” while determining the “common enterprise” prong of the Howey Test.

The SEC first asserted that Ripple was a common enterprise. Later, the regulator reversed its position after one of its experts asserted that the common enterprise was the whole XRP ecosystem, including XRP holders, exchanges, and independent developers.

The SEC dropped the expert’s testimony in response to Ripple and the XRP community’s repeated objections.

“Instead, the SEC argued XRP represents the common enterprise while also arguing XRP represents all of the promises and efforts made by Ripple,” said Deaton.

Through the argument, he claimed that the SEC has declared that XRP fulfills the second and third requirements of the Howey Test. Deaton thinks Judge Torres would refuse to provide the regulator “summary judgment in the manner they have requested” due to SEC’s assertion on XRP.

“What some people have failed to consider is that Judge Torres could say denied to both summary judgment motions and it goes to a jury. Until we get to read all the Rule 56 facts and read all the underlying evidence relied upon, it’s near impossible for me to predict anything more

The SEC’s claims unconstitutionally expand Howey beyond recognition. Remember, the SEC admitted in its response to my Writ of Mandamus that it is the Court that will decide whether the SEC’s theory is valid. I’m confident Judge Torres rejects the SEC’s wild sweeping theory.”
Days before his most recent remarks regarding the lawsuit, Deaton claimed that individuals who believed the SEC would win the case were exaggerating their prospects.

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