Deaton Agrees With Mark Cuban, Says SEC Winning on Appeal Doesn’t Mean Outright Victory

Attorney Deaton is confident that Judge Torres will still give the same ruling in the Ripple case even if the SEC wins on appeal.

In a recent tweet, pro-XRP lawyer John Deaton reiterated that Judge Analisa Torres will still issue the same decision in the Ripple case even though the SEC’s appeal is successful.

Deaton made this known while reacting to a tweet by American businessman Mark Cuban.

Cuban Says Common Enterprise Has Ended For Most Tokens

According to Cuban, SEC Chair Gary Gensler labels crypto holders as investors because it serves his purpose.

Cuban raised a pertinent question, asking how many crypto projects still act as a common enterprise in the industry.

Furthermore, Cuban noted that the decline in crypto investment in the past years shows that the “common enterprise” has ended for many tokens.

Deaton Reacts

Reacting, Attorney Deaton said Cuban made an excellent point.

“This is also why I said an appeal on Torres’ ruling, even if it was successful (I don’t believe it will be), doesn’t lead to an outright victory for the SEC,” said Deaton.

Excellent point. This is also why I said an appeal on Torres’ ruling, even if it was successful (I don’t believe it will be), doesn’t lead to an outright victory for the SEC. Judge Torres did not reach whether a common enterprise existed between Ripple, all other XRP holders, and… https://t.co/E6rb9WFtuY

— John E Deaton (@JohnEDeaton1) July 29, 2023

Common Enterprise Factor Is More Challenging for SEC

He said Judge Torres’ decision on Ripple’s programmatic sales did not focus on whether a common enterprise exists between the company and the entire XRP ecosystem since the third Howey factor was not satisfied.

Notably, Deaton asserted that the common enterprise factor of Howey is more challenging for the SEC to satisfy. Per Deaton, the judge excluded the SEC’s expert opinion on the issue.

In addition, Attorney Deaton said Ripple submitted thousands of affidavits from users who purchased XRP for non-investment purposes.

Judge to Issue Similar Decision 

Recall that Judge Torres ruled that Ripple’s programmatic XRP sales on digital exchanges do not constitute securities, as retail investors were not expecting to make gains from the company’s efforts.

It bears mentioning that the judge arrived at the ruling based on only the third factor of Howey.

Since the judge issued the ruling, several securities lawyers have speculated that the Second Circuit will overturn the verdict.

Meanwhile, Attorney Deaton said that even if the SEC won on appeal regarding the third factor of Howey, the Second Circuit would remand the case. This will enable Judge Torres to apply the other two aspects of the Howey test.

He added that Judge Torres would likely find that the other two factors- “investment of money” and “common enterprise”- are lacking in the XRP transactions the SEC claims to be securities. In this scenario, Deaton speculated that the judge would still give the same result.