Although the XRP community seems to believe that the U.S. SEC’s lawsuit against Ripple does not go to verdict, American lawyer John Deaton, the owner of the Deaton Law Firm, now thinks that “we will get a decision by Judge Torres.”
As you may remember, on 22 December 2020, the SEC announced that it had “filed an action against Ripple Labs Inc. and two of its executives, who are also significant security holders, alleging that they raised over $1.3 billion through an unregistered, ongoing digital asset securities offering.”
On 11 October 2022, at DC FinTech Week 2022, the Ripple CEO said — during a talk he gave titled “Enterprise Crypto and the Regulatory Perimeter” — that he expected the U.S. SEC’s ongoing lawsuit against his firm to come to a close in H1 2023.
On 20 October 2022, Stuart Alderoty, who is Ripple’s General Counsel, announced that Ripple’s legal team had finally managed to get their hands on the documents related to the speech William Hinman, then director of the Division of Corporation Finance at the SEC, gave at Yahoo Finance’s “All Markets Summit: Crypto” one-day event in San Francisco, California on 14 June 2018.
The speech was about how the SEC plans to use the “Howey Test” to determine whether a digital asset should be considered a security or not. The only two cryptocurrencies Hinman mentioned by name were Bitcoin (BTC) and Ether (ETH), neither of which he said should be considered as securities:
“And so, when I look at Bitcoin today, I do not see a central third party whose efforts are a key determining factor in the enterprise. The network on which Bitcoin functions is operational and appears to have been decentralized for some time, perhaps from inception. Applying the disclosure regime of the federal securities laws to the offer and resale of Bitcoin would seem to add little value.
“And putting aside the fundraising that accompanied the creation of Ether, based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions. And, as with Bitcoin, applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value.“
On 2 December 2022, Ripple’s General Counsel announced that Ripple had “filed its Redacted Reply to the SEC’s Opposition to Ripple’s Motion for Summary Judgment.”
On 28 December 2022, John Deaton conducted a Twitter poll to find out how the XRP community expects this lawsuit to get resolved:
As you can see, 59.2% of those who took part in this poll said that they expected the two sides to reach a settlement.
However, Deaton does not share this opinion. On 1 January 2023, he told his over 235K Twitter followers:
“It was my opinion, that if the emails were extremely valuable to Ripple AND extremely damaging to the SEC, the SEC would settle BEFORE turning over the emails, drafts and comments. That didn’t happen. Instead, Ripple has now cited the Hinman emails in its opposition Briefs… Although the SEC asked the Judge to seal the documents, if the judge considers the Hinman speech emails in her decision in any regard, the emails and documents become ‘judicial documents’ and the Judge will order the documents to be filed on the public docket w/a few redactions…
“Although the emails and comments will likely show some underhanded 💩 by the SEC, I don’t believe they are as damaging as people (including me) once believed. If they were, I believe the case would’ve settled by now and the emails wouldn’t have been turned over to Ripple… Yes, I am aware of the tweets 👇 from @bgarlinghouse and @s_alderoty stating the emails were worth the wait and expense and the SEC’s conduct was shocking. Even if the emails prove former SEC officials acted improperly, reckless, or w/bad motive, it doesn’t change the analysis…
“In sum, I believe the SEC has accepted that the emails will eventually become public. In fact, in @bgarlinghouse ’s tweet he said when the truth is eventually known we will be shocked. 👇 It is my opinion now that the Ripple case will not settle because of the Hinman emails…
“IMO, the only other reason for Gensler to settle is to avoid a ruling setting a bad precedent for the SEC as it goes against other tokens. But, tbh, I just don’t think he’s too worried about it. There’s been a push for the CFTC to oversee Crypto, so Gensler may roll the 🎲 dice… unfortunately, I think a settlement w/Ripple is not in Gensler’s mindset. I don’t believe he’s going to settle and publicly agree that ongoing and future XRP sales, including in the secondary market, are non-securities. And Ripple won’t settle unless the SEC so agrees.“