The legal battle between Ripple Labs and the US Securities and Exchange Commission (SEC) over the status of XRP, the third-largest cryptocurrency by market capitalization, is likely to drag on for a long time, according to a lawyer who has been closely following the case.
John Deaton, a pro-Ripple lawyer who represents over 20,000 XRP holders in a class-action lawsuit against the SEC, said in a recent interview that he does not expect a quick settlement between the two parties. He explained that the SEC has a strong incentive to pursue the case until the end, as it seeks to establish its authority and deterrence over the crypto industry.
As I said on @CryptoLawUS TV yesterday with @attorneyjeremy1 and Thien-Vu, I do not believe there has been a single serious conversation regarding settlement between @Ripple @bgarlinghouse @chrislarsensf and the @SECGov.
The SEC is pissed and embarrassed and wants $770M worth… https://t.co/kcXvsrPgaa
— John E Deaton (@JohnEDeaton1) October 25, 2023
The SEC Continues its Missguided Attempts to Hamper Ripple Labs
Deaton also pointed out that the SEC has demanded a hefty penalty of $770 million from Ripple and its executives for allegedly selling unregistered securities. He said that such a large amount would be unacceptable for Ripple, as it would imply an admission of guilt and damage its reputation and business.
The lawyer also highlighted some of the key developments and challenges in the case, such as the upcoming discovery hearing in January 2024, where Judge Sarah Netburn will decide whether to grant Ripple’s motion to compel the SEC to produce documents related to its internal and external communications about Bitcoin, Ethereum, and XRP.
Deaton said that these documents could potentially reveal that the SEC had contradictory or inconsistent views on XRP’s status, or that it had given preferential treatment to Bitcoin and Ethereum, which it considers as non-securities.
He said that such evidence could undermine the SEC’s case and strengthen Ripple’s fair notice defense, which argues that the agency failed to provide clear guidance on XRP’s regulatory status before filing the lawsuit.
Deaton also commented on the recent news that former SEC chair Jay Clayton has joined One River Asset Management, a crypto-focused hedge fund that holds Bitcoin and Ethereum. He said that this move raises questions about Clayton’s motives and conflicts of interest, as he was the one who initiated the lawsuit against Ripple on his last day in office.
The SEC’s latest move against Ripple has been interpreted by the crypto community as a retaliatory measure, after the multiple setbacks the agency has gotten in recent weeks.