On March 31, John Deaton, a well-known attorney closely monitoring the U.S. SEC’s lawsuit against FinTech firm Ripple, shared his latest insights on the ongoing case.
Deaton, Managing Partner of Deaton Law Firm, is the founder of CryptoLaw, a website focusing on U.S. legal and regulatory developments for digital asset holders, and the host of the YouTube channel CryptoLaw.
Through a series of tweets, Deaton communicated his thoughts on potential outcomes for the case to his over 257,000 followers:
Best outcome: Deaton says the optimal outcome for Ripple would involve the judge chastising the SEC for its significant overreach and conduct in the case. He points out that Judge Netburn has already expressed concerns about the SEC lawyers’ hypocrisy and their disregard for faithful adherence to the law.
Second best: The judge rules that Ripple offered XRP as an investment contract (i.e., a security) in specific early instances within the XRP ecosystem, such as a 2014 brochure sent to potential investors. However, the judge would clarify that XRP itself is not a security, and ongoing and secondary sales are not securities.
Third best: The judge denies both the SEC and Ripple’s motions for summary judgment, stating that a jury must decide on disputed facts. The status quo would continue for another year, but the judge would clarify that XRP is simply software code and secondary sales are not securities.
Fourth best outcome: The judge grants the SEC summary judgment against Ripple for both past and present sales of XRP as an investment contract. However, the judge clarifies that the ruling does not apply to secondary sales of XRP. Ripple would then appeal the case, and the status quo would persist for years.
Worst case: The judge grants summary judgment in favor of the SEC, as in the LBRY case, but does not comment the token itself or secondary sales. Deaton would then attempt to intervene in a hearing on damages regarding secondary sales, as he did in the LBRY case.
Deaton has previously stated that he believes Judge Torres will deny the SEC’s motion for summary judgment against Ripple executives Brad Garlinghouse and Chris Larsen. Given the history of U.S. agencies and officials referring to XRP as virtual currency, he argues that no reasonable jury could find the executives reckless.
Deaton also believes that Judge Torres will comment on secondary sales and the token itself. He highlights the significance of the XRP holders’ amicus brief, 3,500 affidavits, and other amicus briefs in influencing the judge’s decision.
In his final remarks, Deaton suggests that if one had to choose a side for an outright victory without any middle ground, Ripple would be the more likely contender. He argues that the SEC’s approach in the case is too broad and far-reaching to secure a complete win. The real question, according to Deaton, is the extent to which Judge Torres will delve into identifying specific offers or sales.