Earlier this week, the SEC recorded an enforcement victory over the crypto project LBRY, which is accused of selling unregistered securities on a decentralized video publishing platform.
As soon as the news broke, the crypto community expressed concern that the ruling could set a precedent for the rest of the industry. At the time, LBRY team warned:
“The language used here sets an extraordinarily dangerous precedent that makes every cryptocurrency in the US a security, including Ethereum.”
Ripple’s case will not be that bad
On 9/11, CryptoLaw, a YouTube channel supported by Attorney John E. Deaton, who is currently speaking out in defense of Ripple on behalf of over 75,000 XRP investors, tweeted 10 reasons why the SEC’s latest win won’t affect Ripple.
According to Deaton, the first reason is that the judge in the above case followed the SG case. The lawsuit was filed in 2003 against a company that operated a “virtual stock exchange” that eventually became a Ponzi scheme. The Ripple judge did not follow up on SG’s case, he said.
Furthermore, the other lawsuits the SEC has won are in different circuits, with different applicable laws. There are 12 regional circuits in the US legal system, organized from 94 judicial districts in the country.
Ripple’s lawsuit is being held on the second circuit, which is Connecticut, New York, and Vermont. LBRY’s lawsuit is on New Hampshire, which is the first circuit. Deaton added that the SEC chose a little-known firm in the small jurisdiction because “they had a favorable judge and wanted to get a favorable ruling.”
According to SEC, it doesn’t matter if the issuer doesn’t advertise the asset in any way. Judge Torres, who is presiding over the Ripple case, may find this to be flawed inference. Deaton exclaimed:
“In 76 years of case law no investment contract has ever been found when there’s no connection between the purchaser and the seller.”
Furthermore, the XRP Ledger has the utility for that. It is supported by MasterCard, Visa and is used as an alternative to fiat in some cases.
Finally, several international jurisdictions, such as the UAE, Japan, the United Kingdom, Singapore, and Switzerland, have declared XRP not a security.
Ripple’s native cryptocurrency XRP has also been hit hard during the current market plunge. At the time of this writing, XRP price is down 7% on the day, trading at $0.36.
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