According to previous reports, lawyer John E. Deaton had claimed that the only thing the US Securities and Exchange Commission could prove in its case against Ripple was that the blockchain payments company offered XRP as a security from 2013 to 2017.
The lawyer thinks the SEC erred by concentrating too much on the token rather than the sale details and failing to do a specific Howey analysis.
The attorney representing the interests of over 75,000 XRP investors in the case explains his arguments more in a lengthy Twitter thread from yesterday.
In the thread, Deaton explains that market regulators have failed to apply certain Howie analyses by identifying transactions that constitute securities offerings. Instead, he said that market regulators are looking to use what he describes as the equivalent of a test to claim that all XRP sales are securities. The theory is that Ripple has worked hard to create a secondary market for XRP, so all XRP constitutes a security regardless of the circumstances of its sale. The Attorney base this on allegations they made in the SEC’s motion for summary judgment.
“Defendants do not dispute that they offered and sold XRP in exchange for ‘money,’ which suffices to establish the ‘investment of money’ aspect of the Howey test,” the SEC wrote. “Defendant’s statements and efforts as to XRP…establish the other aspects of the Howey test as a matter of law.”
In tort and criminal proceedings, the but-for test is frequently used to establish guilt by demonstrating that an outcome directly results from a party’s action and would not have occurred had the party acted differently.
Deaton also notes that the SEC overemphasizes the coin, XRP, to avoid conducting a true Howey analysis. The attorney demonstrates how the market regulator claims that XRP is both an investment contract and a collective entity. The attorney criticizes this, pointing out that this is not how Howey is implemented because the facts of the transaction often establish whether or not an offering is an investment contract.
Remember that Deaton has frequently underlined that an investment contract’s underlying asset cannot serve as a security on its own. Notably, according to a report from the attorney, he persuaded the judge of this in the LBRY case, compelling the SEC to make this commitment in writing.
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As a result, the attorney thinks that the SEC could have had an easy and successful case if they had carried out a comprehensive Howey analysis led by the specifics of the sale, which would have limited the situation to particular transactions rather than all XRP sales, as it presently asserts.
Deaton wrote in the thread;
“This is why I said the SEC may have snatched defeat from the jaws of victory”
While revealing this, he highlights to Judge Analisa Torres that the SEC’s allegations in the Ripple case may be its biggest and most extensive in any enforcement action.
Predictions of the likely results have predominated conversations as both sides have filed all necessary filings and await a court’s ruling. According to Deaton, a jury trial is likely.
