• Attorney John Deaton suggests legal precedents could significantly reduce Ripple’s potential $770 million fine by the SEC.

• Deaton predicts Ripple might pay less in disgorgement than its legal expenses, indicating a possibly favorable result.

In the legal confrontation between Ripple and the United States Securities and Exchange Commission (SEC), Attorney John Deaton, in an interview with Crypto Law US, offered a fresh perspective, potentially altering the course of the dispute. Ripple faces a speculated $770 million fine from the SEC, which Deaton argues could be substantially reduced based on several legal precedents.

Legal Precedents and Ripple’s Defense

Deaton’s argument hinges on a critical interpretation of the U.S. Supreme Court’s Morrison ruling. This precedent could allow Ripple to exclude from the SEC’s reach those XRP institutional sales conducted outside the United States. Given that Ripple executives Brad Garlinghouse and Chris Larsen have disclosed that 95% of their personal XRP sales occurred internationally, this legal angle presents a formidable defense.

This approach aligns with Deaton’s analysis of other significant cases, notably Liu v. SEC and SEC v. Govil. These precedents require that disgorgement, the repayment of ill-gotten gains, go to investors who have incurred actual financial losses.

Given the current price of XRP, Deaton believes that most of Ripple’s institutional sales did not result in such harm, suggesting a significant reduction in the potential disgorgement amount. Additionally, Deaton notes that Ripple may also seek to exclude legitimate business expenses from the disgorgement calculation, further reducing the potential financial impact.

The Global Dimension and Ripple’s Case

Ripple’s international sales are under the spotlight, not just for their volume but also due to the varied legal standings of XRP in different jurisdictions. In the U.K. and Japan, the classification of XRP as not a security bolsters Ripple’s stance against the SEC’s allegations. The disparate regulatory views across borders play a crucial role, challenging the SEC’s pursuit of global transactions within its disgorgement claim.

Moreover, Deaton highlighted that the case against Ripple revolves not around allegations of fraud but as a regulatory dispute. This distinction shifts the focus from punitive measures to compliance and regulatory alignment. With a significant portion of XRP sales occurring outside the U.S. and to accredited investors, the potential disgorgement amount could substantially reduce.

Financial Implications and Ripple’s Stance

Deaton speculated that Ripple’s potential disgorgement might be lower than its legal defense costs. This prediction, if accurate, would mark a significant turn in the SEC vs. Ripple saga.

Notably, Deaton’s insights bring a new dimension to the ongoing legal saga, suggesting a more favorable outcome for Ripple than previously anticipated.  The lawyer also underscored the minimal financial harm to investors, noting that most institutional XRP sales occurred at prices below the current market rate, thus reducing the likelihood of substantial investor losses.

Ripple’s rapid On-Demand Liquidity transactions, which complete within seconds, also diminish the potential for investor harm. This aspect and the accusation that the SEC’s actions have caused more harm than Ripple’s add another layer to the company’s defense strategy. The outcome of this case is poised to have far-reaching implications, not just for Ripple and its stakeholders but for the broader crypto market and its regulatory environment.