The US SEC is not ready to settle its lawsuit against Ripple yet and will be forced to the negotiation table, a pro-crypto lawyer says.
John Deaton, a crypto-focused lawyer and managing partner of Deaton Law Firm, has shared his thoughts on a potential settlement in the ongoing lawsuit between Ripple and the United States Securities and Exchange Commission (SEC).
According to the lawyer, the odds of a settlement between the warring parties remain slim at this point, especially with the SEC not looking likely to want a settlement with Ripple.
In a Wednesday Spaces event on X (formerly Twitter), John Deaton addressed a question in which an individual expressed conviction that the SEC was considering a settlement with Ripple but could not do so because of its legal cases with other crypto entities.
John Deaton strongly disagreed with any suggestion that the SEC was ready to settle and instead emphasized that the regulatory body would have to be forced to that point.
“I don’t think the SEC [the leadership with Gensler] has a settlement on their mind. I think that they are going to be forced to the table. But I don’t think that they are there yet,” the pro-crypto lawyer said.
John Deaton shared his reasons for such a stance, first labeling the leadership at the SEC as “arrogant.”
He noted that the regulatory agency did not expect Ripple executives Brad Garlinghouse and Chris Larsen to fight back when it filed lawsuits against them. The SEC “didn’t expect that they will lose” the Ripple lawsuit either, nor expected that the opinion of some “75,000 XRP holders” would impact the court decision.
Meanwhile, John Deaton noted that there could be a scenario where the SEC crafts a Ripple settlement in such a way that it allows the regulator to continue its pursuit of other crypto projects.
Yet, he explained that such a decision would be dicey based on the conditions Ripple would want to establish as part of a settlement.
A Ripple Settlement Would Impact Other Cases
According to John Deaton, the SEC will likely not pursue a settlement with Ripple because of how doing so would impact its other crypto-related suits, especially against Coinbase.
Recall that the regulator sued the cryptocurrency exchange in June over claims that it operates an unregistered securities exchange.
However, John Deaton expects that Ripple would only settle with the SEC if the regulator agrees in line with recent court rulings that secondary market XRP sales are not securities transactions.
Additionally, the regulator would have to accept Ripple’s arguments that its On-Demand Liquidity (ODL) platform, which uses XRP, is not a security, and transfers on the platform do not constitute securities transactions.
The pro-crypto lawyer reflected on the implications that such a settlement would have on the SEC’s lawsuit against Coinbase.
Precisely, if the SEC agrees with Ripple’s claims, then Coinbase can quickly ‘turn around and say, we’re the secondary market.’ Being a secondary market would mean Coinbase is not facilitating securities transfers, effectively eliminating the core principles used by the SEC in its lawsuit against the exchange.
John Deaton expects the Ripple and Coinbase cases to drag on until next year, potentially leading to the provision of regulatory clarity for the crypto industry. Deaton concluded that such an outcome would allow the underlying technology to reach its full potential in the US market.
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