The Investing Game Has Changed! 
The U.S. Securities and Exchange Commission (SEC) will likely appeal the outcome of its lawsuit against Ripple, but that doesn’t concern pro-XRP lawyer John Deaton.
Judge Analisa Torres sent shockwaves through the crypto ecosystem earlier this month when she ruled that Ripple’s automated, open-market sales of XRP, referred to as programmatic sales, did not constitute security offerings, contrary to what the SEC alleged.
In a recent court filing in a separate lawsuit against Terraform Labs (TFL) and its co-founder Do Kwon, SEC lawyers assert that Torres’ decision in regards to that portion of the Ripple lawsuit was “wrongly decided.”
The SEC says it’s “considering the various available avenues for further review,” suggesting the regulator plans to appeal Torres’ decision in the Ripple case.
Deaton, who represented XRP holders in the Ripple lawsuit, doesn’t think an appeal would be a setback for the crypto sector.
“First, it will be two years from now before a decision is issued by the 2nd Circuit, if it’s appealed. The Torres decision is the law until then – at least in the 2nd Circuit.
Second, even if the 2nd Circuit said Torres was wrong regarding her application of the 3rd Howey factor (which I predict they won’t), that doesn’t mean the SEC wins on programmatic sales (sales on exchanges). All that happens is that Torres then applies the other two factors and could likely still rule the SAME EXACT WAY, concluding the SEC didn’t satisfy the common enterprise factor – which is a more difficult factor to meet, [in my opinion], than the third factor.”
Deaton does note, however, that Torres’ decision isn’t binding within the Southern District of New York.
“A fellow District Judge could disagree with her. But I think a fellow judge in the 2nd Circuit is going to be hard-pressed to disagree with Judge Torres, especially considering she cited Judge Castel from Telegram.”
Last month, Deaton said that Judge Castel made it clear that Telegram’s terminated crypto token Gram itself was not a security.
“The underlying asset is NEVER the security in an investment contract analysis.”
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