In the midst of the SEC’s legal battle against Ripple Labs Inc., a recent tweet from John Deaton, founder of CryptoLaw and attorney for XRP holders, has shed light on potential implications if the SEC were to succeed in appealing Judge Torres’ ruling. Deaton’s tweet highlights the significance of the “common enterprise” factor and its potential impact on the outcome of the case. Meanwhile, the SEC considers an appeal in a separate crypto-related case, reigniting discussions about regulatory clarity and its effects on the cryptocurrency industry.
The Ripple case has been closely watched by the crypto community and legal experts due to its potential ramifications. The SEC alleged that Ripple’s sale of XRP tokens constituted an unregistered securities offering, leading to a high-stakes legal battle. In a notable turn of events, Judge Sarah Netburn of the Southern District of New York ruled that while Ripple’s sale of XRP tokens directly to institutional buyers violated SEC rules, sales to retail investors on exchanges did not, marking a victory for Ripple and the crypto industry as a whole.
In a tweet, John Deaton drew attention to “footnote 13” in Judge Netburn’s ruling, which addressed the “common enterprise” factor. The court found a common enterprise between Ripple and institutional buyers, but it didn’t address whether this extended to other XRP holders or entities in the XRP ecosystem. This factor plays a crucial role in determining whether an investment qualifies as a security under the Howey test, a standard often applied in securities regulation cases.
Deaton suggested that the “common enterprise” factor might pose an even more significant challenge for the SEC than the third factor of the Howey test. If the SEC were to successfully appeal Judge Torres’ ruling, it could result in a remand, and Judge Torres might ultimately find that the SEC failed to prove a common enterprise between Ripple and XRP holders in the secondary market.
In another legal development, the SEC’s filing against Terraform Labs and its co-founder Do Kwon indicated that the agency was considering an appeal in the Ripple case. The SEC asserted that Judge Torres erred in her ruling, particularly regarding the distinction between the expectations of institutional and retail investors. This potential appeal adds uncertainty to the already complex regulatory landscape for cryptocurrencies.
Source: https://azcoinnews.com/secs-potential-ripple-appeal-the-implications-for-xrp-holders.html
