Crypto attorney John E. Deaton has predicted that the U.S. Securities and Exchange Commission (SEC) will only succeed in establishing that the blockchain payments firm Ripple sold XRP as a security from 2013 to 2017 in the ongoing legal battle between the two parties.
Deaton Says Ripple Will Not Be Ordered to Pay Disgorgement in SEC Case
Deaton is currently representing more than 75,000 XRP holders as a friend of the court in the case. In a series of tweets on Feb. 15, the attorney argued that the SEC is pursuing an “all-or-nothing” approach, which includes targeting past, present, and future XRP sales.
Deaton believes that, as a result of the SEC’s approach, the only victory that the agency could hope to achieve is to establish that Ripple offered XRP as an unregistered security during the period between 2013 and 2017.
According to Deaton, if this is the case, the SEC would likely not secure an injunction or disgorgement but only a fine. However, the attorney also noted that he believes the likelihood of a jury trial is higher than what most people believe.
The lawyer has previously argued that a jury trial is still possible in the Ripple case. He contends that the judge could deny both summary judgment motions, citing the existence of a genuine issue of material facts regarding the existence of a common enterprise. This argument, if accepted by the judge, would prevent a quick judgment in favor of the SEC or Ripple.
The SEC filed a lawsuit against Ripple in December 2020, alleging that the company had sold XRP as an unregistered security, thereby violating federal securities laws. The case has since taken several twists and turns, with Ripple filing a motion to dismiss the case, arguing that the SEC had failed to provide sufficient evidence that XRP is a security.
The outcome of the case is being closely watched by the cryptocurrency industry, as it could set a legal precedent for other cryptocurrencies that are currently in regulatory limbo. Despite the legal challenges, XRP has continued to receive love from investors.
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Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.
Today, Ripple Labs Inc. is fighting a blockbuster lawsuit from the U.S. Securities and Exchange Commission (SEC), alleging a three-year-long sale of unregistered securities. The outcome of the lawsuit will have far-reaching implications for the cryptocurrency industry.
Top crypto attorney Jeremy Hogan recently weighed in on the case, sharing his insights on Ripple’s defense and the SEC’s best hope for a win.
According to Hogan, Ripple’s main argument centers around the fact that, since 2013, the SEC has been aware of Ripple’s XRP sale and the SEC’s failure to take action before launching the lawsuit. Hogan explained that, in order to prevail, Ripple must prove that the SEC’s inaction created a reasonable belief of lawfulness.
Hogan pointed out that Ripple also looks to build on its existing defenses by showing that XRP is not a security. To do this, Ripple will likely draw on the Howey Test, which the Supreme Court established in 1946 as the standard for determining whether an asset is a security.
As to the SEC’s best chance of success, Hogan said that the regulator has to establish that the XRP sale was part of an investment contract, which falls under the specified definition of a security. Hogan stressed that the SEC must provide clear evidence that intending purchasers of XRP were reasonably expecting profits from the purchase, and that these profits were generated solely due to the actions and efforts of Ripple.
In conclusion, only time will tell which party – Ripple or the SEC – comes out on top. Until then, it is important to remember that the SEC’s case against Ripple will have far-reaching implications for the cryptocurrency industry regardless of ruling.