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Is the SEC really confident it has a case against Ripple?

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It’s been almost six months since the United States Securities and Exchange Commission first charged Ripple Labs with illegal securities offerings. While the same is well away from being resolved anytime soon, what it has also done is fueled and cultivated a host of opinions on the same, both legal and otherwise.

Attorney John Deaton has been one of those sharing his legal opinions online, with Deaton having already been in the news thanks to his filing of a motion to intervene on behalf of XRP holders in the aforementioned lawsuit.

While Deaton has always argued that both SEC and Ripple Labs are in no position to represent the class of XRP holders he has been representing, like the defendants in the case, Deaton has in the past asserted that the regulatory agency was wrong to take the San Francisco-based firm to court.

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.”

To many in the crypto-community, the belief that the SEC’s case might be faulty resonates on too many levels. In fact, it can perhaps be argued that this is something the agency recognizes as well.

Consider these recent developments, for instance. For starters, the SEC, via a recent filing, told the court presided by Judge Netburn that a loss in the said case would have consequences far beyond the present scope of the case since future defendants will be able to look back at Ripple’s defense as precedential.

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.”


Jibin Mathew George is Editor-in-Chief at AMBCrypto. A domain expert in International Relations (European Politics), he has always been a believer in the unlimited possibilities afforded by blockchain and by extension, cryptocurrencies. As someone who has been watching and writing about this space for over 5 years now, Jibin has closely tracked the emergence of cryptos and digital assets as a separate asset class in portfolios world over. A lawyer by training, he previously contributed to the News and Research desk of Diplomacy & Beyond Plus. Before his stint at D&B, he was Editor at ED Times. Jibin also takes a great interest in politics, especially the corresponding effect political decisions and fiscal policy have on the world of finance, with a special focus on cryptocurrencies.
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