Crypto Lawyer John Deaton Exposes SEC’s Inconsistent Defense in Ripple Lawsuit

Key Insights:

• Crypto lawyer John Deaton criticizes the SEC’s inconsistent defence in the Ripple lawsuit, calling it “schizophrenic.”
• The SEC’s shifting claims about Ripple’s involvement in a joint enterprise have drawn attention and skepticism.
• The presiding judge dismisses the SEC’s argument that every XRP holder depends on Ripple.

John E Deaton, a prominent figure in Crypto Law, has raised serious allegations against the U.S. Securities and Exchange Commission (SEC), suggesting that their defences in the ongoing lawsuit against Ripple, a blockchain solutions company, are inconsistent and contradictory. Deaton has brought attention to the SEC’s ever-shifting assertions about Ripple’s involvement in a joint enterprise, emphasizing the regulator’s perplexing and changing claims.

John Deaton takes on SEC’s assertions

Earlier today, John Deaton expressed his thoughts on Twitter, outlining a series of claims that he deemed excessive, which were put forth by the Securities and Exchange Commission (SEC) during their lawsuit against Ripple in December 2020. Deaton criticized these claims, labelling them as “ridiculously overboard.” The SEC’s primary objective with these assertions was to establish the presence of a joint enterprise, aiming to meet the requirements of the contentious Howey Test.

When determining the applicability of the Howey Test, one must consider the scenario wherein money is invested in a collective venture, anticipating reasonable profits that stem from the endeavours of others. In an important reminder to his supporters, Deaton highlighted the SEC’s initial assertion, stating that Ripple was deemed the typical enterprise in the lawsuit.

The securities regulator acknowledged this statement after Ripple’s demonstration that individuals who held XRP did not receive any interest in the blockchain company. As a result, the SEC was compelled to alter its perspective and assert that the collective XRP ecosystem constituted the shared enterprise, encompassing not only XRP holders but also the exchanges facilitating XRP transactions and the merchants accepting XRP as a means of payment.

Judge drops Ripple’s reliance argument

To bolster their new assertion, the regulatory authority leaned on account of a proficient witness who affirmed that every holder of XRP is dependent on Ripple. Nonetheless, the presiding judge dismissed this line of reasoning during the proceedings.

According to John Deaton, the SEC’s defence in the XRP case must be more consistent. The regulatory body has repeatedly changed its claim, leading Deaton to refer to it as a “schizophrenic defense.” In its latest argument, the SEC posits that XRP is the typical enterprise in question, which Deaton finds to be a nonsensical assertion.

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