XRP Lawyer Takes a Decisive Win for Ripple and Crypto
Even though the legal battle between Ripple and the US Securities and Exchange Commission went unheard yesterday, Ripple, XRP and the entire cryptocurrency industry have achieved an important partial victory in their fight against excessive regulation by the SEC through the application, thanks to attorney John E. Deton.
In yesterday’s appeal hearing, the SEC asked for a statement by the New Hampshire District Court judge who issued a broad and vague injunction against the sale of the LBRY token, in which the token itself becomes a security, bringing secondary market sales under SEC jurisdiction.
This could not only be disastrous for secondary market sales of XRP, but for all cryptocurrencies, with the exception of Bitcoin, which has already been declared non-security by the SEC. In a recent video for Crypto Law TV, Deaton – who also represents 75,000 XRP holders in the SEC v. Ripple case – recounted what happened in the courtroom.
“We all know that the SEC likes to have top law enforcement capabilities at its disposal. That’s why we got involved,” she said, further reporting that the judge did a great thing. “HWe basically looked at the SEC and said, do you agree with him […] Everyone assumed that… Do you agree with Deaton?”
This showed that the judge was willing to put his November 7, 2022 ruling into perspective. At that time, it granted a summary judgment in favor of the US Securities and Exchange Commission and classified each sale of the LBC token for a period of six years as an investment contract without detailing the nature of the transactions.
This opened the door for the SEC to move closer to its goal of gaining legitimacy through the ruling to also gain legitimacy of secondary market regulatory oversight. Yesterday, however, the judge clarified that the ruling was misinterpreted by the SEC.
Related reading: Ripple Hits New UNL Decentralization Milestone, Here Are the Attendees
The judge said the SEC has to do something and described two examples. The judge explained an example where LBRY sold its LBC token to an investment club that kept it in cold storage: a direct sale. The judge said he believed it was an unregistered security offering, and the SEC agreed.
The second example he gave was from the secondary market. Deton reported:
And then the judge said but if Flipside sells it to someone else on the secondary market, independent of LBRY, you have to accept that my order doesn’t apply to this scenario. And this is the victory we have achieved. The SEC had to admit it on the record, in real time.
Surprisingly, the judge then turned to Deaton and told him: “amicus, I will clarify that my order does not apply to secondary market sales.”
This is why winning is crucial for Ripple and XRP
The judge undertook to clarify in the final remedy that he does not rule on the secondary market. The SEC openly admitted in court that it does not consider secondary sales as securities. This is a huge partial win for the entire cryptocurrency industry, but also for Ripple, as Deaton further commented:
This hearing today if you think we’re going to get regulations from congress soon, then the ruling is irrelevant because congress will give us clarity. If we don’t get any clarity from Congress, there will be no regulation that says anything that defines a security, […] then this hearing was extremely important.
LBRY hearing: The stakes for ALL cryptocurrencies https://t.co/YPbrBkw0Od
—CryptoLaw (@CryptoLawUS) January 30, 2023
At press time, XRP was trading at $0.3955, down 3.8% in the past 24 hours. With this, XRP is following the general sentiment in what is likely to be a risk-off move ahead of tomorrow’s FOMC meeting.
Featured image from Gr Stocks / Unsplash, chart from TradingView.com