Deaton Explains How Judge Torres Will “Decide Same Result” If Higher Court Reverses Ripple Victory 

Attorney Deaton speculates that Judge Torres could still give the same result using other Howey factors if the Second Circuit reverses Ripple’s victory.  

Pro-XRP lawyer John Deaton has reacted to the growing criticisms of Judge Analisa Torres’ ruling in the SEC v. Ripple lawsuit.

In a tweet today, Attorney Deaton said the judge issued the ruling after applying the Howey test to each XRP transaction the SEC claimed violated federal securities law.

“THE TORRES DOCTRINE” AS IT HAS BEEN CALLED IS SIMPLY A STRICT APPLICATION OF A 1946 TEST TO MODERN DAY BLOCKCHAIN TECHNOLOGY.

Judge Torres did a strict application of the Howey Test to each type of #XRP sale the SEC claimed violated the law. https://t.co/bqel8bGIMK

— John E Deaton (@JohnEDeaton1) July 19, 2023

It bears mentioning that the Howey Test is a legal test in the United States that determines whether a transaction constitutes a security. Notably, Deaton said the Supreme Court emphatically stated that when determining whether a transaction constitutes an investment contract, the focus should be on whether the Howey Test is satisfied.

Furthermore, Attorney Deaton asserted that all that matters in determining an investment contract is the application of the Howey factors.

Per Deaton, Judge Torres ruled that Ripple’s XRP sales to institutional investors satisfy all prongs of Howey. In contrast, Ripple’s programmatic XRP sales on exchanges did not.

Deaton said that since the SEC claims Howey provides industry participants with relevant information to determine which token is a security, the judge applied the test to the undisputed facts in the Ripple case.

“There is no prong of the Howey Test that asks the Judge to evaluate the level of sophistication related to the buyers,” said Deaton.

Institutional sales satisfied all factors of the Howey test. Programmatic sales on exchanges did not satisfy all factors of the test. There is no prong of the Howey Test that asks the Judge to evaluate the level of sophistication related to the buyers.

— John E Deaton (@JohnEDeaton1) July 19, 2023

Court to Give Similar Ruling If Ripple’s Victory Is Reversed

Deaton’s remarks come in the wake of growing criticisms against Judge Torres’ ruling. Many securities lawyers said the judge’s decision regarding Ripple’s XRP sales to institutional and retail investors is inconsistent. They speculate that the decision will be reversed on appeal.

Reacting to these speculations, Attorney Deaton said if the SEC successfully gets Judge Torres’ decision reversed in the Second Circuit, the case will be remanded. Thus, the higher court will return the case to Judge Torres for further action.

Deaton explained that if the Second Circuit reverses Judge Torres’ decision on the third prong of Howey (expectation of profit), she could get back the case and rule that the common enterprise factor (the second prong) is not satisfied between XRP holders and Ripple Labs.

He noted that the second prong of the Howey test – common enterprise – is a significant issue for the SEC in this case. As reported, Attorney Deaton slammed the SEC over its contradictory arguments about what constitutes a common enterprise in the lawsuit.

Additionally, Deaton speculated that the judge could push the issue of consumptive intent to the jury. Notably, Deaton said Judge Torres could decide the same result if she applies the first two factors of Howey.

“Brilliant move Judge Torres. The point is the SEC lost. Period,” Deaton concluded.