John Deaton, a well-known American lawyer and founder of CryptoLaw, recently shared his insights on the ongoing lawsuit between the U.S. Securities and Exchange Commission (SEC) and Ripple. Deaton, who has been closely following the case, made his comments during an interview on 3T Warrior Academy’s “Good Morning Crypto Show” on June 3, 2023.
Deaton expressed his belief that the crux of the case lies in whether Ripple had fair notice, a point that he believes will be decided by the jury. He also mentioned that he expects U.S. District Court Judge Analisa Torres to comment on secondary market sales, given that 76,000 XRP holders have joined as amicus, and the issue has been highlighted in the brief.
Deaton expressed his anticipation for Judge Torres to address the issue of secondary market sales, stating that he would be “grossly disappointed and discouraged and shocked” if she didn’t. He believes that XRP itself will be deemed not a security and that Judge Torres will comment on secondary market sales, even if she rules that Ripple violated the law.
Deaton also suggested that Ripple could achieve a “good clean victory” if Judge Torres decides that Ripple met the Howey test from 2013 to 2018, but that ongoing and future sales and secondary market sales are not securities. He believes this would allow Ripple to argue to a jury that they are excused from violating the law due to a lack of fair notice.
In terms of the potential outcomes of the case, Deaton estimated the chances of “an outright total victory” for the SEC at less than three percent, “an outright total victory” (meaning she doesn’t even hold those early sales of XRP to be a violation of U.S. securities laws) for Ripple at 25 percent, and a split decision at 50 percent. If we get this third outcome, he believes that would lead to a settlement because the SEC does not want a jury to have the chance to say that the early sales of XRP by Ripple were not a violation of securities laws since that could make it much harder for the SEC to go after other crypto tokens).
And if we do go to a jury trial, Deaton thinks that the earliest this would start is Autumn 2024.