Following the recent ruling on the Ripple Labs vs SEC case, Attorney John Deaton has provided his insights on why an appeal would not change the decision and highlighted inconsistencies in the SEC’s argument. The judge in the Southern District of New York ruled that Ripple is not necessarily a “security on its face,” which has been met with criticism from some securities lawyers who argue that Ripple’s XRP sale to institutional and retail investors is inconsistent. These lawyers believe that the decision could be overturned on appeal, but Deaton disagrees.
Deaton explains that the judge made the decision after applying the Howey Test to each XRP transaction claimed to have violated federal securities law. The Howey Test is used in the United States to determine whether a transaction is considered a security. Deaton believes that the ruling would stand on appeal because the Supreme Court has already emphasized the importance of applying the Howey Test in such cases. However, he also points out that programmatic sales on exchanges did not satisfy all the factors of the test.
If the ruling is overturned in the second circuit, Deaton explains that the case would be remanded, meaning it would be returned to Judge Analisa Torres to take further action. The judge could rule that the second enterprise factor is not satisfied between XRP holders and Ripple Labs if the ruling is overturned on the third prong of the Howey Test or expectation of profit. Deaton also notes that the SEC’s position on what constitutes a common enterprise in the lawsuit is contradictory. Another possibility is that the judge could push the issue of consumptive intent to the jury.
Chris Martin, head of research at Amberdata, suggests that the SEC may change its tactics in ongoing cases following the recent rulings. He believes that the judgment that XRP is not a security will provide clarity on what constitutes a security and what constitutes a commodity. This could lead to the SEC revising its tactics in several ongoing cases and potentially implicating other tokens as non-securities.
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The news of the ruling has been met with positivity from crypto investors, as XRP experienced a surge of 71% and reached a trading price of $0.810933. Coinbase, which delisted XRP following the lawsuit, has announced that it will allow the trading of the asset again. Gemini is also exploring possibilities to list XRP for both spot and derivatives trading.
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