The U.S. Securities and Exchange Commission (SEC) is likely to appeal the outcome of its lawsuit against Ripple, but that will not involve pro-XRP attorney John Deaton.
Judge Analisa Torres sent shockwaves through the crypto ecosystem earlier this month when she ruled that Ripple’s automated, open-market sale of XRP, known as programmatic sales, did not constitute a security offering, contrary to what the SEC claimed.
In a recent court filing a separate lawsuit against Terraform Labs (TFL) and its co-founder Do Kwon, SEC attorneys allege that Torres’ decision regarding that portion of the Ripple lawsuit was “misruled.”
The SEC says it is “considering the various avenues available for further review,” suggesting the regulator plans to appeal Torres’ decision in the Ripple case.
Deaton, who represented XRP holders in the Ripple lawsuit, does not think an appeal would be a setback for the crypto sector.
“First, it will be two years from now for a decision to be made by the 2nd Circuit, if appealed. The Torres decision is the law until then – at least in the 2nd circuit.
Second, even if the 2nd Circuit said Torres was wrong about her application of the 3rd Howey Factor (which I predict they won’t), that doesn’t mean the SEC is winning on programmatic selling (exchange sales). All that happens is that Torres then applies the other two factors and could probably still rule in the SAME EXACT WAY, concluding that the SEC failed to meet the common venture factor – which is a more difficult factor to satisfy, [in my opinion]than the third factor.”
Deathon does remarkhowever, that Torres’ decision is not binding within the Southern District of New York.
“A fellow district judge cannot agree with her. But I think a fellow 2nd circuit judge would have a hard time disagreeing with Judge Torres, especially given that she quoted Telegram’s Judge Castel.
Last month, Deaton said that Judge Castel made it clear that Telegram’s discontinued crypto token Gram itself was not a security.
“The underlying asset is NEVER the security in an analysis of an investment contract.”
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