SEC Commissioner Hester Peirce concedes that her colleagues at the United States Securities and Exchange Commission (SEC) failed to carefully analyze the digital token XRP before filing the lawsuit against Ripple in December 2020. Recall that the SEC official had earlier said that Ripple would win the long-standing XRP lawsuit.
Hester Peirce reportedly termed the examination carried out by her SEC colleagues on XRP a ‘shorthand analysis’, per a tweet by the pro-XRP proponent John Deaton. This so-called shorthand constitutes an unconstitutional shortcut taken by the SEC in the XRP lawsuit that violated 76 years of case law, Deaton noted.
He wrote, “Hester Peirce admitted that her colleagues at the SEC perform a “shorthand” analysis and focus on the token itself instead of the circumstances surrounding the offering and sale of the token (ie “the contract, transaction or scheme”).”
@HesterPeirce admitted that her colleagues at the @SECGov perform a “shorthand” analysis and focus on the token itself instead of the circumstances surrounding the offering and sale of the token (ie “the contract, transaction or scheme”).
— John E Deaton (@JohnEDeaton1) February 3, 2023
According to the Crypto Law founder and the attorney representing over 75,000 XRP holders in the Ripple-SEC lawsuit, the regulator has refused to focus on the circumstances surrounding the offering and sale of XRP; instead, it is focusing on the token itself.
Read Also: Cory Johnson’s Interview after Hinman’s Speech: “This Can Only Mean XRP is Not a Security Either”
Notably, the SEC’s theory is that the XRP token itself, including those traded in the secondary market, constitutes a security. Dragon tagged this novel embodiment theory dangerous as the SEC is attempting to use it to expand its jurisdictional reach into secondary market transactions. He added that the theory stretches Howey beyond recognition.
“Practically speaking, the Judge rejected the SEC’s embodiment theory that it first articulated in the Ripple case when the SEC responded to the Motion to Intervene that I filed on behalf of XRPHolders,” Deaton disclosed.
Read Also: Ripple CTO Defines What Constitutes a Security and Commodity as the SEC Battles Over XRP
Based on this, the top attorney blasted the SEC in the amicus brief he filed weeks ago in the ongoing XRP lawsuit. Deaton noted that the securities agency currently chaired by Gary Gensler is analytically lazy.
He wrote: “In my amicus brief in the Ripple case, I said the SEC was analytically lazy and its so-called shorthand constituted an unconstitutional shortcut violating 76 years of caselaw. We must fight the SEC’s overreach and its attempt to exercise jurisdiction in secondary markets.
“The SEC doesn’t go transaction by transaction and argues that XRP embodies or represents both the common enterprise and expectation of profits prongs of the Howey test,” he added.
John Deaton restated his confidence in Ripple defeating the SEC in the XRP lawsuit, expected to be wrapped up in Q2 of 2023. He reiterated that the presiding judge will deny the SEC’s summary judgment highlighting two reasons. First, he said the underlying asset (XRP in this case) is never a security in an investment contract case. Secondly, he mentioned that the Howey test requires analysis at the time of each offer or sale which is something the SEC failed to do.
Additionally, the lawyer highlighted the significance of the latest ruling recently given in the SEC v LBRY case. The judge ruled that LBC tokens sold in secondary markets do not constitute a security.
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