Lawyer John E. Deaton Criticizes SEC as the Ripple General Council Points Out a Key Legal Point

Ripple’s General Council Hits at SEC

Stuart Alderoty, Ripple’s General Council, has recently tweeted an excerpt from a court ruling in Securities and Exchange Commission v. W. J. Howey Co. case.

Alderoty commented on the excerpt that the SEC had failed to successfully argue that when the term ‘common enterprise’ is mentioned in the securities law, the term ‘community of interest’ was included unnecessarily. Alderoty stated that the SEC was wrong then and is wrong now as the terms ‘common enterprise’ and community of interest are not the same.

Lawyer Bill Morgan reacted to Alderoty’s tweet as he highlighted that the points raised by Alderoty were also included by Ripple in its summary judgment motion. Bill stated that SEC’s stance, however, does not satisfy the burden on the agency under Howey.

The point is made in Ripple’s summary judgment motion. “Common interest is no substitute for common enterprise and does not satisfy the SEC’s burden under Howey.” This responds to the SEC’s argument that because XRP is fungible the fortunes of holders are tied together. pic.twitter.com/2qYZgPnyvY

— bill morgan (@Belisarius2020) May 13, 2023

Bill noted that Ripple’s argument that the term ‘common enterprise’ does have the same connotation as the term ‘community interest’ also answers to SEC’s argument that the fortunes of XRP holders are tied together as the token is fungible.

Deaton’s Response

Lawyer and amicus curiae John E Deaton also responded to Alderoty’s tweet as he stated that the SEC does not only ignore the law but it also brags about it. Deaton quoted the SEC:

“The Commission, on the other hand, does not require vertical or horizontal commonality per se, nor does it view a “common enterprise” as a distinct element of the term “investment contract.”

The SEC is so arrogant it ignores the law and brags about it.

“The Commission, on the other hand, does not require vertical or horizontal commonality per se, nor does it view a “common enterprise” as a distinct element of the term “investment contract.”https://t.co/SDfUdgQuy7 https://t.co/Axrp0yqtnc

— John E Deaton (@JohnEDeaton1) May 15, 2023

It is notable that since Gary Gensler has taken charge as the SEC chairman, regulator’s enforcement actions against crypto have increased. SEC’s policy of regulating the industry through enforcement action has, however, met with criticism. Most recently the US Chamber of Commerce criticized SEC in a brief the organization filed in the SEC-Coinbase lawsuit.