Can Individuals Pursue a Class-Action Lawsuit? John Deaton Calls It ‘Challenging’

Ripple’s long legal battle with the SEC has finally ended, marking a big win for the cryptocurrency world. The case, which centered on whether XRP is a security, concluded with Ripple paying a reduced fine of $25 million instead of the original $2 billion. Ripple can continue operating internationally but faces limits on XRP sales to U.S. institutions. 

The SEC even apologized for mischaracterizing XRP, raising doubts about its regulatory approach. Ripple’s victory is seen as a major boost for the crypto industry, and excitement is growing about XRP’s future potential.

On the Good Morning Crypto Show, attorney John Deaton, who represented over 75000 XRP users,  was asked a question relating to XRP: ‘Now that the lawsuit is nearing its conclusion, some individuals are curious whether they can file a class-action lawsuit against the SEC for allegedly bringing a false case against Ripple, the company behind XRP.’

Can The SEC Face Consequences For Their Actions?

Deaton explained that filing a class-action lawsuit against a government agency like the SEC is not that simple. While people have sued the SEC before, those lawsuits faced challenges. When it comes to mere negligence or poor regulation by the SEC, it’s generally difficult to hold the agency legally accountable. Deaton said that the law doesn’t typically allow suing a government agency for simply being a bad regulator.

Inspector General Investigation To Play A Crucial Role?

However, Deaton added that there is an ongoing Inspector General (IG) investigation, and the final results of that investigation could change things. Depending on the findings, there may be a basis to overcome the legal hurdles. For example, it’s very difficult to sue the SEC unless there’s evidence of gross abuse of discretion or something akin to criminal misconduct, such as deliberately misleading behavior.

If the IG report uncovers misconduct, there could potentially be grounds for a civil lawsuit against certain individuals within the SEC. This could include claims of regulatory capture, where the regulator favors a few companies or people at the expense of others. However, Deaton stressed that it’s a difficult path, and the possibilities would depend heavily on what the IG report ultimately reveals.