Prominent Pro-XRP attorney John E. Deaton has downplayed the potential effects of an appeal by the United States Securities and Exchange Commission (SEC) in its ongoing case against Ripple for selling the XRP token as an unregistered security.
The SEC postpones a possible appeal against Ripple’s decision
On July 13, US Judge Analisa Torres of the US District Court for the Southern District of New York ruled that programmatic sales of XRP did not violate US securities law as the SEC could not prove that retail investors had expected profits from this investment based on the “entrepreneurial or managerial efforts of others”.
The decision was based on the Howey Test, which states that a contract, transaction or scheme is an “investment contract” and, therefore, a guarantee if it is (1) an investment of money, (2) in a joint enterprise, (3) with the expectation of profit (4) to be earned by the efforts of others.
For the first time since the ruling, the SEC hinted on July 21 that it may appeal the decision in one of its petitions in another ongoing case against Terraform Labs and its co-founder, Do Kwon.
Attorneys for those defendants had earlier filed a motion to dismiss the charges against their clients based on Ripple’s latest ruling. However, the SEC responded by saying that the decision favoring Ripple was “erroneously decided” and the commission may soon consider ways to review this judgment.
The file said:
Contrary to the defendants’ assertions, the bulk of Ripple’s decision supports the SEC’s claims in this case and rejects the arguments the defendants have raised here. However, with respect to Programmatic sales and other sales, the SEC respectfully acknowledges that Ripple conflicts with and adds unreasonable demands to Howey and his successors. Respectfully, those portions of Ripple were erroneously decided and this Court should not follow them. The SEC staff is reviewing the various avenues available for further review and intends to recommend that the SEC request such a review.
SEC’s potential appeal to be irrelevant – John Deaton
In response to whether an appeal by the SEC in its case against Ripple would represent a setback for XRP, well-known crypto lawyer and XRP supporter Deaton has offered a positive view implying that this was not the case.
According to a tweet on July 22, Deaton supported this claim by stating that an appeal from the SEC would initially take two years to get a decision from the Second Circuit. In the US legal system, the courts for the second circuit represent one of the 13 US Courts of Appeals.
Additionally, counsel stated that assuming the Second Circuit found that the application of the third Howey factor was erroneous, US Judge Torres would again apply the first two Howey factors and reach the same decision.
Deaton also stated that Torres’ decision was definitely not final in the Southern District Court of New York, and there is a possibility that another district judge might come to a different conclusion.
However, he said it was unlikely, especially since Judge Torres made this judgment citing the ruling in the popular SEC v. Telegram case, in which the commission won an injunction to prevent Telegram from distributing GRAMS tokens on claims that it was an unregistered security.
At the time of writing, XRP is trading at $0.7404, a 3.58% gain in the last day based on data from Tradingview.
XRP trading at $0.7404 on the daily chart | Source: XRPUSD Chart On Tradingview.com
Featured image from Leadership News, chart from Tradingview.