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Ellie Terrett interviews John Deaton on the summary judgement filings


HAL1000
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I was on a high after watching the Jeremy Hogan video that was released a few hours ago, but after watching this to the end, I can easily see that John Deaton’s warnings about the SEC destroying Crypto in the US by taking the case to the Supreme Court, a scenario that once they commence could take 7 years , coming to fruition.

Sure the US isn’t the only market, but right now it is still the most important if XRP is to make us all rich.

His assertion that the SEC will not agree a settlement because it makes no sense, if also it is about to sue exchanges. The SEC wants crypto regulated under securities laws. Settlement with Ripple would make any attempt to sue exchanges and other crypto dead in the water.

The SEC wants to protect the status quo and keeping the Ripple case alive by going to Supreme court achieves that.

@BillyOckham, We might be too old to benefit from a supreme court win in 2030!

 

 

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7 minutes ago, WarChest said:

Settlement with Ripple would make any attempt to sue exchanges and other crypto dead in the water.


The only hope I hold is that they might settle with Ripple on a very limited basis of both agreeing that XRP was a security at some point, and Ripple therefore pay a shitload of fines, but that now it’s decentralised enough (or some other sleight of hand) not to be a Security.  Looks like a SEC win on paper,  but frees up XRP.

Which is an entirely wrong set of “facts” on all counts,  but would leave Ripple and XRP free and clear without providing coverage for any other coin so the SEC can then continue its wrecking ball way of crippling innovation.

Slim hope,  but it’s my only one really.

 

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14 minutes ago, PunishmentOfLuxury said:

AFAIK if a lower court decides in favour of Ripple, that is the law until the case is successfully appealed by the SEC at a higher court.

True.  But it does not mean that institutions will be comfortable using that law if they think it can be reversed.  Obviously it’s unthinkable that a reversal would be retroactive but still they may not want to commit to something they think may later be undone.

So to me a settlement is far superior to a win.

 

Edited by BillyOckham
Used ‘unthinkable’ instead my earlier ‘unlikely’.
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well that's all a tad depressing. This supreme court theory explains a lot to be honest, and I could see how it could have been the SECs goal the entire time. My god I may have to get the heck out of xrp once and for all - lets hope for some kind of settlement like Billy said.  

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If Ripple wins or they settle and we see an xrp price surge, you can bet I'll be taking profits early and often. After a potential win or settle, how long of a period would SEC have to wait until they official start an appeal to a higher court ?

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5 hours ago, BillyOckham said:


The only hope I hold is that they might settle with Ripple on a very limited basis of both agreeing that XRP was a security at some point, and Ripple therefore pay a shitload of fines, but that now it’s decentralised enough (or some other sleight of hand) not to be a Security.  Looks like a SEC win on paper,  but frees up XRP.

Which is an entirely wrong set of “facts” on all counts,  but would leave Ripple and XRP free and clear without providing coverage for any other coin so the SEC can then continue its wrecking ball way of crippling innovation.

Slim hope,  but it’s my only one really.

 

The SEC's summary judgement, for some reason, does not contest that XRP itself could be a security or that secondary sales could be securities. It is very focused on Ripple having sold XRP as an investment contract, and the individual Defendants for their alleged involvement. Did they change tactics just as they did with Hinman's speech not being personal but policy related? And Ripple focused on post-sale obligations being a necessary component of an investment contract. To me, the fight is not based on the merits of the SEC's SJ brief but on the legal interpretation of Ripple's brief. Frankly, XRP's exposure to the SEC's proposed test and the ongoing regulation is very limited.

Even if the secondary sales of XRP are deemed to be not securities and Ripple's theory on post-sale obligation wins, the majority of crypto is still at a significant risk. If Ripple loses on its theory and/or secondary sales of XRP are deemed securities, the rest of crypto is screwed.

The Digital Commodity Exchange Act currently in Congress intends to hand off digital commodities to CFTC. But most tokens may not qualify to be a Commodity. Per the proposal, an asset that conveys an entitlement to any interest/dividend payment would be a security and not a commodity.

So that brings us to a few questions:

  • Is a smart contract a contract in legal terms? It's intended to replace a central party/organization by software doing the same job. By that interpretation, it is a "contract".
  • Obviously not all contracts are investment contracts. So what additionally is needed for an investment contract? 
    • Per current law (as Ripple noted), a post-sale obligation. All smart contracts have post-sale obligations of some sorts. Because it is doing something.
    • Expectation of profits. Just having post-sale obligations isn't enough. Escrows wouldn't be investment contracts. Oracles are probably not included. Other things like minting NFTs, sale of image NFTs on a marketplace (e.g. on Open Sea) etc. are just sale of assets. But sale of LP tokens might be sale of securities.
  • Now, would staking distributions from smart contracts be considered expectation of profit? Take ETH2.0 staking. You're putting up collateral (aka funding) the network via a contract and participating in the network (voting) in return for a "reward".  This is also true for FTSO in Flare/SGB.
  • DeFi Lending is almost certainly an investment contract.

I personally think that definition of an investment contract should be updated to not include staking "rewards". But the law as it currently stands will have a much easier way to prove proof-of-stake networks as involving securities activity than networks like XRP which just have pure speculation and no built in rewards. 

The answers to these questions will no doubt be debated and lobbied for/against vigorously. 

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13 minutes ago, RandyMarsh said:

If Ripple wins or they settle and we see an xrp price surge, you can bet I'll be taking profits early and often. After a potential win or settle, how long of a period would SEC have to wait until they official start an appeal to a higher court ?

I can understand the sentiment. Waiting years and years for finally something substantial to happen to XRP besides the very occasional and very short-lived speculative pumps, only to find oneself in the face of ANOTHER mutli-year wait is probably more than most can take.

As to your question, I am no expert here, but I dare venture an educated guess - If there is a settlement there cannot be an appeal, it is the end of the case once and for all. That's the whole point of a settlement, to have any disagreement settled out of court and for good. If Ripple wins there can be an appeal, however, it has to be done on specific grounds like being able to prove the judge was somehow prejudiced against you or that the due process was not upheld. You cannot appeal a court decision just because you do not like it. That is AFAIK, I could be mistaken.

However, give the extraordinarily generous leeway the SEC has been granted by the courts so far, they may get their way if dragging the case out on end and appealing to make that happen after all other options are used up is their goal here.

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45 minutes ago, Ripley said:

But the law as it currently stands will have a much easier way to prove proof-of-stake networks as involving securities activity than networks like XRP which just have pure speculation and no built in rewards. 

That's interesting if it has had any part in the long term view of the Ripple team. It wouldn't have been solely for the purpose of avoiding securities laws (obviously) but David Schwartz has made the point on several occasions "that the best incentive is no incentive" which I actually believe to be true for something that aims to be public infrastructure. 

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A little light at the end of the tunnel:-

https://www.cftc.gov/About/Commissioners/CarolineDPham/index.htm

Caroline D. Pham was sworn in as a CFTC Commissioner on April 14, 2022, after being nominated by President Biden and unanimously confirmed by the U.S. Senate.

 

Edited by HAL1000
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7 hours ago, Ripley said:

The SEC's summary judgement, for some reason, does not contest that XRP itself could be a security or that secondary sales could be securities. It is very focused on Ripple having sold XRP as an investment contract, and the individual Defendants for their alleged involvement.

Changing tactics like this…the reason US exchanges delisted XRP was due to the sale of securities on the secondary market allegation…even if Ripple lose, could damages still be due to XRP holders who have suffered the consequences of delistings and XRP price reaction?

The investment contract allegation would bring ETH further back into the fold surely, given the original sales pitch to raise funds through sale of ETH tokens to build the network and increase the value of ETH. SEC internal discussions on ETH may be even more relevant to Ripples investment contract defence.

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5 minutes ago, PirateParrot said:

could damages still be due to XRP holders who have suffered the consequences of delistings and XRP price reaction?

Sorry, but no. There is no obligation, remember ? 

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