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- Following statements by securities lawyers concerning the recent ruling on the Ripple Labs vs SEC case, Attorney John Deaton thinks the court applied the Howey Test.
- According to him, an appeal would not come with any different decision as he spots some inconsistencies in SEC’s argument.
The crypto community has been in a good mood since the judge in the Southern District of New York ruled that Ripple is not necessarily a “security on its face”. Some securities lawyers have criticized the court’s decision claiming that Ripple’s XRP sale to institutional and retail investors is inconsistent. For this reason, they strongly believe that this decision could be overturned on appeal. However, Pro-XRP lawyer John Deaton disagrees with these claims. According to him, the Judge decided after applying the Howey Test to each XRP transaction claimed to have violated federal securities law.
THE TORRES DOCTRINE” AS IT HAS BEEN CALLED IS SIMPLY A STRICT APPLICATION OF A 1946 TEST TO MODERN-DAY BLOCKCHAIN TECHNOLOGY. Judge Torres did a strict application of the Howey Test to each type of #XRP sale the SEC claimed violated the law.
The Howey Test exists as a legal test in the United States used to determine whether a transaction is made up of security. Deaton believes that the ruling would stand on appeal as the Supreme Court has already emphasized that the Howey Test must be applied in such cases. According to him, programmatic sales on exchange, however, did not satisfy all factors of the test.
According to Howey, it is “immaterial” whether the asset or enterprise (ie XRP) is speculative or non-speculative. According to Howey, it is “immaterial” whether the asset itself has intrinsic value or not. All that matters is the application of the Howey factors. HARD STOP!
More Details on the Ripple vs SEC Case
Deaton has also explained that in a situation where the US Securities and Exchange Commission manages to get the ruling overturned in the second circuit, the case would be remanded. In this case, the case would be returned to Judge Analisa Torres to take further action.
Also, if the ruling is overturned on the third prong of Howey or expectation of profit, she could certainly rule that the second enterprise factor is not satisfied between XRP holders and Ripple Labs. Interestingly, the second prong of the Howey test is very significant to the SEC in this case. However, Deaton thinks the Commission’s position on what constitutes a common enterprise in the lawsuit is contradictory. Another option is that the judge could push the issue of consumptive intent to the jury.
Chris Martin, head of research at Amberdata, has also stated that the SEC may change its tactics in some of the ongoing cases.
The judgments today are a huge step forward for the industry. By judging that XRP is not a security we’re starting to get clarity on what constitutes a security and what constitutes a commodity — the SEC will have to revise their tactics on several of their ongoing cases and I expect that this judgment will implicate several other tokens as non-securities.
Crypto investors have reacted positively to the news as XRP surged by 71 percent to trade at $0.810933 after the news. This brings its current market cap to $42,672,808,052 and its 24-hour trading volume to $22,764,356,279.
Coinbase, which delisted XRP following the lawsuit, has said that it would allow the trading of the asset again. Gemini also claims it is exploring possibilities to list the asset for both spot and derivatives trading.
