Deaton Says SEC Lawyers Learned Nothing From Ripple Lawsuit

Attorney Deaton slams the SEC for constantly shifting its arguments and abandoning its previous claims.

In a recent tweet, pro-XRP lawyer John Deaton said the United States Securities and Exchange Commission (SEC) learned nothing from its legal tussle with Ripple Labs.

Attorney Deaton made this known while reacting to a recent motion filed by Gemini to dismiss the SEC’s lawsuit against it.

It bears mentioning that the US-based crypto exchange Gemini is urging a federal judge to dismiss the SEC lawsuit because the regulatory agency failed to establish a clear case to prove that it was selling unregistered securities. 

Deaton Highlights SEC Litigation Tactics 

Deaton quoted a part of the motion in his recent tweet, which read: 

“The fact that the SEC cannot decide what is the security at issue only underscores the weakness of its position. It also violates fundamental fairness and the requirement of fair notice.”

Attorney Deaton said the SEC is fond of establishing new arguments while disregarding its previous stance.

“That, my friends, sums up the SEC and its approach to litigating crypto cases,” he added.

SEC Lawyers like Jorge Tenreiro and @SECEnfDirector have learned NOTHING from the @Ripple case. Their arrogance is mind blowing.

In the Gemini Reply, @cameron & @tyler state:

“the fact that the SEC cannot
decide what is the security at issue only underscores the weakness of… https://t.co/uszdpDpzBC

— John E Deaton (@JohnEDeaton1) August 21, 2023

SEC’s Shifting Arguments in Ripple Case

Attorney Deaton explained that the SEC was transactional and constantly shifting its theory in the Ripple case. Per Deaton, during the legal tussle for the Hinman document, the SEC first argued that the speech was William Hinman’s personal opinion and not guidance to the market.

However, the SEC changed its position after Judge Sarah Netburn ordered the agency to surrender the documents. This time, it argued that Hinman was the director of SEC’s Corporation Finance during the speech. Thus, he gave the remark as a guide and opinion of the Corporation Finance division.

Furthermore, Attorney Deaton also recounted the SEC’s shifting stance in the Ripple case during the argument on what constitutes the common enterprise.

Firstly, the agency claimed Ripple was a common enterprise. Interestingly, the SEC abandoned the argument after Ripple successfully argued that investors did not receive any interest from the company by merely holding XRP. 

The SEC changed its position and argued that the entire XRP ecosystem was the common enterprise. Deaton noted that the entire XRP ecosystem includes all XRP holders globally, crypto exchanges supporting XRP trading, and all businesses and vendors using the coin.

Notably, the SEC changed its position again and argued that XRP itself represents the common enterprise.

SEC “Nonsensical” Argument

Attorney Deaton described the SEC’s argument as “nonsensical” after the regulator claimed that XRP represents the second and third factors of the Howey test. 

The pro-XRP lawyer said the SEC’s shifting stance was so bad in the Ripple case that a federal judge called out the regulator’s hypocrisy. Deaton said the judge also slammed the SEC’s lawyers for lacking faithful allegiance to the law.

According to Deaton, SEC chair Gary Gensler and SEC lawyers are unbothered that a federal judge called them hypocrites because they believe they are bigger than the law.