Attorney Deaton referred to the SEC’s position about what defines a common enterprise in the case as a “schizophrenic argument” today in a tweet, referring to a mental ailment that causes the regulator to interpret reality incorrectly.
Deaton asserts that the SEC’s “schizophrenic argument” about the second prong of the Howey test (common enterprise) may lead Judge Analisa Torres to reject both the SEC and Ripple’s motions for summary judgment.
According to Deaton, if this occurs, the court presiding over the case can decide that “there is a genuine issue of material facts as to the existence of a common enterprise.”
Deaton Criticizes the SEC’s Common Enterprise Argument
Less than two weeks have passed since Attorney Deaton first predicted that Judge Torres would probably deny Ripple and the SEC’s motions for summary judgment.
“What some people have failed to consider is that Judge Torres could say denied to both summary judgment motions, and it goes to a jury,” Deaton stated in a Twitter thread.
He continued by saying that it is getting more difficult to predict what will happen in the lawsuit because he has yet to review all of the Rule 56.1 facts and the supporting evidence cited.
In the Ripple case, the SEC’s shaky defense of what qualifies as a common enterprise has been heavily condemned by attorney Deaton. The founder of Crypto Law claimed that the SEC’s use of the common enterprise defense was “all over the place.”
According to Deaton, the SEC first classified Ripple as a common enterprise. But after one of its experts testified that the whole XRP ecosystem, including investors and crypto trading platforms, is included in the common enterprise in the case, the regulator reversed its stance.
Following opposition from Ripple and the XRP community, Deaton said the SEC abandoned the expert’s testimony. He noted:
“Instead, the SEC argued XRP represents the common enterprise while also arguing XRP represents all of the promises and efforts made by Ripple.”
According to Deaton, the SEC would not be given summary judgment based on how it presented its common enterprise argument.