Deaton Believes Ripple Has A Better Chance In Proving XRP Isn’t A Security

Attorney Deaton thinks Ripple will have a different outcome from what LBRY got against the SEC.

Members of the Ripple community have continued to panic following the Securities and Exchange Commission’s recent victory against the peer-to-peer content distribution network, LBRY.

It can be recalled that the SEC sued LBRY in May 2021 for offering unregistered security in the United States. The suit came months after the Securities and Exchange Commission also sued Ripple for violating U.S. securities laws via its XRP offering.

Deaton Calms XRP Holders

Following the SEC’s victory over the decentralized content platform LBRY, many believe the District Judge who presided over the ruling has poked a major hole in the Ripple lawsuit. Thus, spreading panic in the Ripple community.

While the XRP community is restless, attorney John Deaton, the founder of Crypto Law, has tried to calm the situation by highlighting multiple factors that could enable Ripple to have a different outcome in its case against the SEC.

Attorney Deaton agrees that the LBRY ruling is a bad decision. However, he noted that the ruling is not the law, but only an interpretation of the law by a District Judge in the LBRY case.

Reasons Why Ripple Lawsuit Is Different

According to Deaton, the LBRY defense team did not challenge the second prong of the Howey test (common enterprise). In addition, the Defense team did not even request the Judge to differentiate between LBRY’s secondary market sales and the company’s direct sales.

“In the Ripple XRP case, the common enterprise is challenged. In fact, the SEC argued – incoherently – regarding the common enterprise,” he said.

The Crypto Law founder noted that the SEC had claimed that Ripple was the common enterprise. However, the SEC dismissed the claim when it became clear that XRP holders do not obtain legal and financial interests in the Silicon Valley tech company.

The SEC further used an expert witness who claimed that the entire XRP ecosystem was the common enterprise, attorney Deaton said, adding:

“But because XRP holders fought back and supplied 3K affidavits, refuting this alleged expert, the expert back down and testified that he might have come to an entirely different conclusion if he had known what we were declaring in those affidavits at the time he wrote his report.”

Deaton further said the SEC was forced to abandon its expert witness and proceed to summary judgment, asking Judge Analisa Torres to substitute a “but for” test for the “Howey test”.

The SEC’s argument in the Ripple case is very simple:

The SEC is asking the judge to substitute a “But For” test for the Howey Test. Of course, they don’t frame it that way but that is what they are doing.

— John E Deaton (220K Followers Beware Imposters) (@JohnEDeaton1) November 7, 2022

Deaton concluded that he expects the SEC will make a big deal about its LBRY victory in the Ripple case.

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