Bill Morgan, a crypto lawyer and digital asset enthusiast, shares that his ongoing review of the Daubert challenge documents reveals a significant weakness in the SEC arguments against Ripple.
Then there was the SEC’s argument that the expert evidence of a Ripple expert on treatment of XRP under other legal or industry regimes is irrelevant. The evidence is that based on its economic characteristics it is not a security /4— bill morgan (@Belisarius2020) February 1, 2023
In a thread of tweets, Morgan stated that one interesting thing he discovered while reviewing Ripple's response to the SEC's Daubert challenge was the agency's inconsistencies, or "typical change of position." He cites instances.
First, an SEC expert opined on the viability of Ripple's cross-border remittance product, alleging that ODL was not a genuine use case for XRP.
The SEC revised its position and said the matter was irrelevant after Ripple's expert refuted the SEC's assertions and demonstrated that cross-border remittance use was feasible.
Ripple argued that the ''the hypocrisy suggests that the SEC is adopting its litigation positions to further its desired goal and not out of a faithful allegiance to the law.''
Striking evidence: XRP is not security, under GAAP
Morgan added that the SEC argued that the evidence provided by a Ripple expert regarding the treatment of XRP under other legal or industry regimes was irrelevant.
From @JWVerret last October re GAAP and #XRP: “It would be the functional equivalent of telling Google they must list “the internet” as an asset on its balance sheet because Google’s value is closely connected to the internet.” https://t.co/SBWEitwGW8— CryptoLaw (@CryptoLawUS) February 2, 2023
The evidence was that, based on its economic characteristics, XRP is not a security.
Ripple's response to the SEC goes thus:
Even if security can mean one thing under federal securities law and another under Treasury regulations, CFTC regulations, federal tax laws, and GAAP, the practical treatment of XRP under these other laws and regulations – and the SEC's long silence about it – is highly relevant to whether an objective person had fair notice that the SEC would suddenly, many years later, claim that XRP is a security.
It continued, "This point is especially strong with respect to GAAP because the SEC itself has regulatory authority over GAAP. Evidence that XRP is not a security under GAAP shows that even a framework under the SEC's own supervision contradicts the SEC's litigating position in this case.''