CryptoLaw founder John Deaton, who is also XRP holders' attorney in the Ripple-SEC lawsuit, has blasted the United States Securities and Exchange Commission (SEC) for the inconsistencies in its defense concerning the ongoing Ripple lawsuit.
"Let's not forget the SEC's schizophrenic theory regarding what constitutes the common enterprise in the case," John Deaton tweeted.
Deaton stated that, at first, the SEC claimed Ripple was the "common enterprise." Then Ripple forced the SEC to concede that XRP holders receive no interest in the firm by owning XRP tokens.
The SEC then shifted its theory and said the entire XRP ecosystem constituted the common enterprise, including all XRP holders in the world, all the exchanges that list XRP and all the vendors or companies that accept XRP as a form of payment.
He continued that for the SEC to try and prove such a ridiculously overboard claim, it intended to rely on an expert witness who testified that all XRP holders must rely on Ripple. The good news is that this expert witness was excluded by the judge.
Instead of conceding, the SEC, once again, shifted its common enterprise theory, abandoning its earlier claims in favor of a new theory: XRP itself represents the common enterprise. Deaton calls this "a schizophrenic defense."
The SEC is so arrogant it ignores the law and brags about it.— John E Deaton (@JohnEDeaton1) May 15, 2023
“The Commission, on the other hand, does not require vertical or horizontal commonality per se, nor does it view a "common enterprise" as a distinct element of the term "investment contract."https://t.co/SDfUdgQuy7 https://t.co/Axrp0yqtnc
In a recent tweet, Deaton criticized the agency, saying, "The SEC is so arrogant it ignores the law and brags about it." The CryptoLaw founder referred to Ripple's general counsel's comments on the SEC's unsuccessful argument as regards investment in a "common enterprise."
XRP gains edge based on this argument
Ripple's Chief Legal Officer Stuart Alderoty highlighted some facts in the Revak case that expose the SEC's sleight of hand. He stated that without a "common enterprise," it does not matter whether "the fortunes of investors" are tied to the efforts of others. Thus, the Howey test is not "so easily satisfied."
I was going to do a "Reason #3 XRP was not sold as a security" Tweet this week, but Stu/Bill beat me to it.— Jeremy Hogan (@attorneyjeremy1) May 14, 2023
And did it better anyway.
The Revak case lays it out well, and based on the Court record, XRP was not sold as a security at LEAST since 2018. https://t.co/UWRrQjc86I pic.twitter.com/E0ng5QzCcX
Pro-XRP lawyer Jeremy Hogan aligns with Alderoty's take on the SEC-Revak case. He noted that "the Revak case lays it out well, and based on the court record, XRP was not sold as a security at least since 2018."