SEC May Appeal Ripple Case, Deaton: “Waste of Taxpayer Money”

• The SEC is considering appealing the July 2023 Ripple ruling on programmatic sales of XRP.
• A former SEC lawyer claims the agency believes the decision was legally flawed.
• John Deaton argues an appeal could be unnecessary and a waste of taxpayer money.

The U.S. Securities and Exchange Commission (SEC) may appeal Judge Analisa Torres’s July 2023 ruling in the Ripple case, according to reports.

Fox Business correspondent Eleanor Terrett detailed on X that a former SEC lawyer informed her that many within the agency believe the ruling concerning Ripple’s XRP programmatic sales is “legally incorrect” and should be contested.

Notably, the deadline for filing the appeal is October 7, leaving the SEC with a short window to act. Judge Torres’s ruling last year determined that Ripple’s programmatic sales of XRP did not constitute the sale of unregistered securities.

SEC Believes Ruling Was “Not Good Law”

A former SEC lawyer, speaking to Eleanor Terrett, said, “Everyone over there [at the SEC] truly believes that the decision is wrong, that it’s not good law, and should be appealed.”

The agency’s apparent dissatisfaction with the decision centers around its implications for how crypto assets like XRP are sold through open market channels, such as online platforms or using bots, hence “programmatic.”

Deaton: SEC Appeal Would Be a Waste of Taxpayer Money

However, John Deaton, a lawyer involved in the case, expressed skepticism about a potential SEC appeal. Deaton explained that while the SEC may want to challenge the ruling, Judge Torres’s decision relied on the specific facts of the Ripple case, which might not apply to other scenarios involving XRP.

Deaton believes the judge ruled based on the Howey Test, a legal benchmark used to determine if a transaction qualifies as an investment contract. In this case, the judge ruled that the third prong of the test, concerning the expectation of profit, was not satisfied by the facts presented.

Deaton argued that even if the SEC wins on appeal, the case could simply be sent back to Judge Torres, where she might rule again that Ripple’s sales do not meet the criteria for an investment contract. This could lead to extended litigation and further appeals, making the process costly and time-consuming.

Deaton warned that an appeal could ultimately be a waste of taxpayer money, given the fact-based nature of Judge Torres’s ruling. He added that Ripple could also appeal if the ruling were reversed, potentially dragging the case out even longer.