XRP Lawyer Scores Crucial Victory for Ripple and Crypto

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Even though the legal battle between Ripple and the U.S. Securities and Exchange Commission went unheard yesterday, Ripple, XRP, and the entire crypto industry have won an important partial victory in their fight against the overregulation of the SEC by enforcement, thanks to attorney John E. Deaton.

At yesterday’s appeal hearing, the SEC sought an assertion from the New Hampshire District Court judge issuing a broad and vague injunction against the sale of the LBRY token, in which the token itself becomes a security , placing secondary market sales under the jurisdiction of the SEC.

This could not only be disastrous for secondary market sales of XRP, but for all cryptocurrencies except Bitcoin, which has already been declared unsafe by the SEC. In a recent video for Crypto Law TV, Deaton – who is also representing 75,000 XRP holders in the SEC v Ripple case – covered what happened in the courtroom.

“We all know that the SEC likes to have maximum law enforcement capabilities. That’s why we got involved,” he said, further reporting that the judge had done a great thing. “He basically looked at the SEC and said, you agree with him […] Everyone thought that… Do you agree with Deaton?

This showed that the judge was willing to put his decision of November 07, 2022 into proper perspective. At that time, he entered summary judgment in favor of the United States Securities and Exchange Commission and classified every sale of the LBC token over a six-year period 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 a decision to also gain legitimacy from regulatory oversight of the secondary market. Yesterday, however, the judge made it clear that the ruling was being misinterpreted by the SEC.

Related Reading: Ripple Takes Another Step in Decentralizing UNL, Here Are the Participants

The judge said the SEC had to commit to something and described two examples. The judge explained an example in which LBRY sold its LBC token to an investment club that held it in cold storage – a direct sale. The judge said he considered it an offer of an unregistered security and the SEC accepted.

The second example he gave concerned the secondary market. Deat reported:

And then the judge said but if Flipside sells it to someone else in the secondary market, independent of LBRY, you have to agree that my order does not apply to that scenario. And that’s the victory we had. The SEC had to concede it on the record, in real time.

Remarkably, the judge turned to Deaton afterwards and said, “Amicus, I will clarify that my order does not apply to secondary market sales.

This is why victory is crucial for Ripple and XRP

The judge undertook to specify in the last appeal that he does not rule on the secondary market. The SEC openly admitted in court that it does not consider secondary sales to be securities. This is a huge partial win for the entire crypto industry, but also for Ripple, as Deaton further commented:

This hearing today if you believe that we will soon receive regulations by Congress, then the decision is irrelevant because Congress will give us clarification. If we don’t get any clarity from Congress, there won’t be any regulation that says something that defines a security, […] so this hearing was extremely important.

LBRY Hearing: The Stakes for ALL Crypto https://t.co/YPbrBkw0Od

— CryptoLaw (@CryptoLawUS) January 30, 2023

At press time, the price of XRP stood at $0.3955, down 3.8% in the last 24 hours. With that, XRP is following the general sentiment in what is likely to be a risky move ahead of tomorrow’s FOMC meeting.

XRP price, 1-day chart | Source: XRPUSD on TradingView.com

Featured image from Gr Stocks / Unsplash, chart from TradingView.com

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