Even though the legal dispute between Ripple and the U.S. Securities and Exchange Commission was not heard yesterday, thanks to attorney John E. Deaton, XRP, and the entire cryptocurrency industry won a significant partial victory in their fight against the SEC’s overreaching regulation by enforcement.
In yesterday’s appeal hearing, the SEC sought confirmation from the New Hampshire district court judge that he issued a wide, ambiguous order on the sale of the LBRY token, in which the token itself becomes a security, placing secondary market sales within SEC jurisdiction.
This might be devastating not just for XRP sales on the secondary market, but for all cryptocurrencies save Bitcoin, which the SEC has previously ruled is not a security. Deaton, who is also defending 75,000 XRP investors in the SEC vs. Ripple lawsuit, detailed what transpired in court in a recent video for Crypto Law TV.
“We are all aware that the SEC prefers to have the most accessible law enforcement tools. That’s why we got engaged,” he said, adding that the judge performed an excellent job.
This demonstrated that the judge was willing to contextualize his November 7, 2022 judgement. During that time, he awarded summary judgement in favour of the U.S. Securities and Exchange Commission and characterized each sale of LBC tokens during a six-year period as an investment contract without elaborating on the nature of the transactions.
This allowed the SEC to come closer to its aim of obtaining credibility via rulings in order to obtain legitimacy for regulatory monitoring of the secondary market.
The secondary market was the second example he provided. Deaton stated: The court said, “However, if Flipside independently sells it to a third party on the secondary market, you must accept that my order does not apply.” And that is the success we achieved. The SEC had to admit it on the record and in real-time.
Unbelievably, the judge then turned to Deaton and said, “Amicus, I will make it quite plain that my ruling does not extend to secondary market transactions.”
The court promised to clarify in the final remedy that he is not deciding on the secondary market. The SEC has explicitly conceded in court that secondary transactions are not considered securities. This is a significant partial success for the whole cryptocurrency sector, including Ripple, as Deaton remarked further.
“If you believe that we will soon get rules from Congress, then today’s hearing is unimportant since Congress will provide clarification. If we’re not going to receive any clarification from Congress and there won’t be a rule that defines a security, […] then this hearing was really essential.”
At press time, the price of XRP was $0.3955, a decrease of 3.8% over the previous 24 hours. Ahead of tomorrow’s FOMC meeting, XRP is following the broader attitude in what is likely a risk-off move.
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