There have been talks about the US Securities and Exchange Commission (SEC) and Ripple Labs reaching a settlement following the ruling that XRP isn’t a security. Following this, Pro-XRP lawyer John Deaton has stated a key factor that could lead to a settlement between both parties.
Coinbase’s Motion Key To Settlement
In a tweet released on the X (formerly Twitter) platform, Deaton stated that the “only way” the SEC and Ripple can settle this year is if Judge Failla grants Coinbase’s motion to dismiss the SEC’s lawsuit against it.
The lawyer believes that the key is for Judge Failla to find that token sales on an exchange as part of a programmatic sale do not fall under US securities laws. If that happens, the Commission and its chair, Gary Gensler, may have no choice but to “pivot,” according to Deaton.
He further noted that Judge Failla’s ruling may be final as he doubts the Solicitor General would allow an appeal as the case could end up reaching the Supreme Court, which could “strip away” the SEC’s powers and that of other federal agencies.
The SEC had filed a lawsuit against Coinbase, alleging that the biggest crypto exchange in the US was operating as an unregistered securities exchange by offering several cryptocurrencies on its platform without first registering with the SEC.
In response, Coinbase filed a motion to dismiss the case, stating that the regulator was stepping outside its jurisdiction with such an action. The exchange said the token sales weren’t investment contracts but more commodity sales, with “obligations on both sides discharged” once the transaction occurred.
Interestingly, Coinbase cited Judge Torres’ ruling in favor of Ripple that programmatic sales, such as ones on exchanges, didn’t constitute investment contracts.
How Deaton’s Ripple Settlement Theory Could Play Out
Going by Deaton’s theory, it is believed that the SEC would want to settle with Ripple if the court ruled that the Commission has no jurisdiction over token sales on exchanges. This is plausible because Judge Failla granting Coinbase’s request represents a setback for the Commission in its case against Ripple.
The SEC argues that Ripple’s programmatic sales constituted an investment contract, making XRP a security. However, a win for Coinbase ultimately makes the programmatic sales argument baseless, and it can no longer further the argument since token sales on exchanges are outside its purview.
Regarding the SEC and Gensler wanting to “pivot,” as mentioned by Deaton, this could mean the Commission solely focusing on Ripple’s sale to institutional investors, which the court ruled constituted an investment contract.
Considering that the regulator still has a long way to go to prove which institutional sales were made to domestic investors (the only ones the SEC has jurisdiction over), it may settle with Ripple rather than prolong a case it may eventually lose.