The ongoing legal battle between the SEC and Ripple continues with a new court ruling
Judge Analisa Torres has made an initial decision in the legal case involving the U.S. Securities and Exchange Commission (SEC) and Ripple Labs. However, it is not a summary judgment decision. Instead, the judge’s decision on both parties’ requests to exclude expert testimony from summary judgment (also known as “Daubert” motions) is contained in a 57-page document.
Ripple and the SEC appear to be tied at first. The motions of the SEC are partially granted and partially denied, and the motions of Ripple are partially granted and partially denied.
Former lawyer and Evernode XRPL co-founder Scott Chamberlain said, “Neither side gets everything it asked for because neither side had impeccable arguments for everything it wanted. How sharp, rigorous, and utterly impartial Judge Torres is is what leaps out.”
The SEC has to prove that you had a REASONABLE expectation of profits from Ripple’s efforts.
And the Judge just struck the SEC’s ONLY Expert Witness on that subject.
So, now, how the heck can the SEC prove “reasonable” reliance? Who will testify?
Just thinking out loud. 🙂 https://t.co/qnqvxEAMI2 pic.twitter.com/ujjfRt657q
— Jeremy Hogan (@attorneyjeremy1) March 7, 2023
No definite winner or loser can be inferred from the decision, as Chamberlain says. But Ripple comes out on top when it comes to one of the most significant results of the decision—the disqualification of Patrick Doody, the top expert witness. This person was chosen by the SEC to examine XRP buyers’ expectations.
Attorney for the XRP community Jeremy Hogan stated on Twitter that Doody was essential since it helped the SEC establish that investors had a “responsible” expectation of rewards from Ripple’s efforts. “And the Judge just struck the SEC’s ONLY Expert Witness on that subject. So, how the heck can the SEC prove “reasonable” reliance? Who will testify? Just thinking out loud”, he stated.
Judge Torres’ decision on expert witness number three, which Ripple deemed “irrelevant and unreasonably prejudicial,” favored the SEC. The judge acknowledges that the final component of the Howey test for an investment contract, “about Defendants’ incentives and actions to influence the price of XRP is directly relevant,” is immediately relevant based on the expert’s testimony.
According to Hogan, the judge believes that “expert #3’s opinion as to Ripple’s incentives and actions to influence XRP price is relevant to the issue of reasonable expectation of profits”.
Another unfortunate result of the Daubert challenges for the SEC was their attempt to have XRP community attorney John E. Deaton excluded from the case, partly because he divulged their expert witness’s identity. Instead, she allowed Deaton to testify and concurred with him that Doody shouldn’t. Bill Morgan, a representative of the XRP community, has also discovered several justifications for why Ripple might have prevailed in the judge’s decisions.
at page 29 “How to interpret the Supreme Court’s reasoning in Howey is the central question in issue in this case” . Schwartz is permitted to testify about Ripple’s contracts and how they differ from the Howey contracts. That is important. /2
— bill morgan (@Belisarius2020) March 7, 2023
According to Morgan, the SEC claimed that Ripple used at least six moves to drive up the price of XRP in its application for summary judgment. In connection with this, the SEC also suffered a setback since the judge rejected Dr. Metz’s assertion that Ripple’s announcements were to blame for the price of XRP.
Morgan is also “pleased” that most of Alan Schwartz’s report is permitted. This has anything to do with the “Blue Sky” query. Schwartz will be permitted to speak in court regarding the contracts with Ripple and how they differ from those with Howey. That’s important, Morgan remarked.
The judge also acknowledged that the contracts’ provisions were important in determining whether there was an investment contract. She stated that the analysis is pertinent to Schwartz’s evidence. “I was also heartened that the judge accepts that XRP having a use is relevant to the inquiry as to the third prong of Howey. I thought Adriaen’s opinion on this issue which the judge allowed was more important than the two opinions she denied”, Morgan said.
XRP/USD 4-hour chart | Source: TradingView
Overall, Ripple has not achieved a complete win but is undoubtedly progressing. The publication was met with a cautious response from the XRP price, which has increased by 2% in the past day. XRP’s price at the time of publication was $0.3689.
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