Real Danger To Ripple Is That SEC Does Not Have To Prove Sale Of An Unregistered Security: Deaton

Deaton says it could be game over for crypto regulation in the US should Judge Torres adopt the ruling in the LBRY case.

Amicus Curiae, in the US Securities and Exchange Commission vs. Ripple lawsuit, Attorney John E. Deaton, in a tweet yesterday, has asserted that the real danger to Ripple is that the SEC does not have to prove the sale of an unregistered security.

According to the lawyer, the SEC only has to prove that Ripple offered unregistered security. 

“… the real danger to Ripple is that the SEC doesn’t have to prove the actual sale of an unregistered security,” wrote Deaton in a Twitter thread. “It only has to prove Ripple made an ‘offering’ of an unregistered security.”

The lawyer representing thousands of XRP holders asserts that for this to happen, Judge Analisa Torres will have to disregard secondary sales and rule reasoning that owning billions of XRP alone without any formal contract by Ripple constitutes an offer of security. However, Deaton believes that this scenario is unlikely.

He says so, citing that the Judge had allowed the participation of XRP holders in an amicus curiae capacity for the greater duration of the case. According to Deaton, it shows a desire to understand the perspective of XRP holders, and it would make no sense for Judge Torres to disregard all of that in crafting her ruling.

It bears mentioning that in addition to this, the Judge has also given time for affected entities to submit amicus briefs. So far, at least 12 entities have submitted briefs in favor of Ripple. In contrast, no entity has requested to file a brief supporting the SEC.

According to Ripple chief Brad Garlinghouse, each of these briefs explain the harm the SEC will do to the emerging crypto economy in the US if it wins. Deaton asserted yesterday that if Judge Torres adopts the LBRY ruling, it would be game over for crypto regulation in the US.

The crypto community believes that a win for the SEC will only bolster its regulation by enforcement campaign and extinguish hopes for clear crypto regulations. 

Pro Ripple Lawyer James K. Filan believes that Judge Torres will make her ruling on or before March 31, 2023. Notably, the Ripple camp has expressed confidence in securing victory after finally receiving the hotly contested documents related to the draft of the controversial speech by former SEC director William Hinman.