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The US Securities and Exchange Commission initially accused Ripple Labs with unlawful securities sales over six months ago. While the issue is unlikely to be addressed anytime soon, it has generated and nourished a slew of legal and non-legal perspectives on it.
Attorney John Deaton has been among those voicing their legal thoughts online, and Deaton has previously made headlines for submitting a request to intervene on behalf of XRP holders in the aforementioned litigation.
While Deaton has always maintained that neither the SEC nor Ripple Labs are in a position to represent the class of XRP holders he has been representing, such as the defendants in the case, Deaton has previously stated that the regulatory agency was incorrect to sue the San Francisco-based business.
In a recent Twitter thread about “What is the LAW,” the Managing Partner of Deaton Law Firm used Judge Castel’s observations in the Telegram case to argue, again, that the SEC’s case against Ripple Labs and its execs Garlinghouse and Larsen is faulty on some level.
According to the attorney, in the aforementioned case, “the ‘security’ was neither the Gram Purchase Agreement nor the Gram, but the entire scheme,” with Deaton adding,
“J. Castel basically said the oranges 🍊 in Howey weren’t securities and neither are digital tokens (whether #Grams or #XRP or whatever).
In Telegram, like Howey, there were actual purchase contacts involved and the Courts said even the contracts themselves aren’t the Securities.”
Many members of the crypto-community believe that the SEC’s case is flawed on multiple counts. Indeed, it is possible to claim that the agency understands this as well.
Consider the following recent happenings. For openers, the SEC informed the court presided over by Judge Netburn in a recent filing that a defeat in the case would have far-reaching repercussions since future defendants will be able to use Ripple’s position as precedent.
What’s more, Jay Clayton, ex-Chair of the SEC under whom the agency filed the lawsuit in the first place, recently co-authored an Op-ed where he seemingly repeated some of Ripple’s old talking points.
On the back of Ripple’s string of small legal victories over the past few months, do the aforementioned developments sound like the SEC is confident it has a case? According to many, the answer is in the negative. In fact, according to some like attorney Arturo Portilla, “there’s a possibility they were aware that the facts/law weren’t completely on their side, so they preferred to throw the embarrassment hot potato to the entrant team.”
Deaton was quick to chip in here as well, with the attorney speculating,
“At the end of the day, you don’t file the most significant enforcement action in modern history regarding the hottest topic in global finance (digital currency) and walk out the door the next day. It stinks of corruption.”
What then? At the end of the day, all of this is just conjecture, with no party certain of which way the court is likely to rule. According to Deaton, however, the pendulum will swing the defendants’ way if the court follows the existing precedent. He added,
“Even though people have called for a Ripple Test or a more modern test than Howey when applied to digital assets, make no mistake about it – under current law (ie Howey and Telegram) – #XRPHolders win.”