Deaton Says Don’t Be Overconfident As Court May Not Completely Adopt Ripple Arguments Against SEC

Attorney Deaton makes a shocking analysis that may not be pleasing to XRP holders.

Attorney John Deaton, the founder of Crypto Law, said XRP investors might be disappointed in the end if they think Judge Analisa Torres will completely adopt Ripple’s argument in the recently-filed summary judgment motion.

Deaton noted that he has seen many people across various social media platforms claim that Judge Torres will definitely agree with Ripple’s argument.

“If people think it is a foregone conclusion that Judge Torres is going to wholeheartedly adopt the argument articulated in Ripple’s Summary Judgment motion, you are likely overconfident,” Deaton said.

According to Deaton, it is one thing to claim that the SEC cannot prove that XRP is a security. However, it is a different argument when people think Judge Torres would completely adopt Ripple’s argument and give a ruling in favor of the blockchain company.

He made reference to Ripple’s argument, where the defendants argued that before the Howey test can be applied, there must be an underlying contract between the seller and the buyer.

Quoting an excerpt of the Howey case, attorney Deaton said: “An investment contract for purposes of the Securities Act means a contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a third party.”

Deaton Backs His Analysis

Per Deaton, the Securities and Exchange Commission might build its argument around the plain language used in Howey. Based on this, the securities regulators may claim that the law does not require the offering to be an underlying contract since the plain language used in Howey says, “a contract, transaction, OR scheme.” 

The Crypto Law founder added that the SEC might focus on the “scheme” aspect of Howey and claim that XRP’s creation and Ripple’s effort to create value for the cryptocurrency are all part of a scheme. 

“I’m only telling you what the SEC is likely to claim. It doesn’t mean I agree with it or that it will be successful. Sometimes when I articulate the SEC’s argument, some people misinterpret it,” attorney Deaton added. 

Deaton said that for Judge Torres to completely agree with Ripple’s argument in the summary judgment motion, she would indirectly say her colleague Judge Castel was wrong in his ruling on the Telegram vs. SEC lawsuit. 

“… For the judge to agree with Ripple’s argument, she will have to agree that her well-respected colleague, Judge Castel, was wrong in Telegram b/c Judge Castel, in his decision, in part, focused on a scheme (even though ironically, Telegram involved actual contracts).

This is why I said Ripple’s motion was written like an appellate brief to the 2nd Circuit or the Supreme Court. Ripple’s motion focuses, as it should, on the second circuit because all of the 2nd Circuit cases since Howey involved actual contracts – according to Ripple’s brief.”

This is why I said Ripple’s motion was written like an appellate brief to the 2nd Circuit or the Supreme Court. Ripple’s motion focuses, as it should, on the second circuit because all of the 2nd Circuit cases since Howey involved actual contracts – according to Ripple’s brief.

— John E Deaton (216K Followers Beware Imposters) (@JohnEDeaton1) September 26, 2022

Furthermore, Deaton thinks Ripple’s argument in its summary judgment motion would easily be adopted in the Supreme Court or the second circuit, adding:

“It may be a tough sale to get Judge Torres to agree 100% on the underlying contract requirement and that scheme only applies after you find a contract. I do think the motion is a winner with the Current Supreme Court and maybe the 2nd. It’s possible Judge Torres agrees w/ Ripple.

Judge Torres could disagree with Ripple’s argument but Still find for Ripple. She could reject the underlying contract theory but apply Howey and say Ripple wins summary judgment b/c the SEC cannot meet the common enterprise prong of Howey. The opposition briefs will say a lot.”

Judge Torres could disagree with Ripple’s argument but Still find for Ripple. She could reject the underlying contract theory but apply Howey and say Ripple wins summary judgment b/c the SEC cannot meet the common enterprise prong of Howey. The opposition briefs will say a lot.

— John E Deaton (216K Followers Beware Imposters) (@JohnEDeaton1) September 26, 2022

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