A California federal court on Wednesday heard arguments in a class-action lawsuit that revolved in part over whether Ripple could be classified as a security. One of Ripple’s most vocal advocates, attorney John Deaton, has also been instrumental in Coinbase’s response to the SEC.
The United States District Court for the Central District of California held a hearing on Wednesday in its class action case against Ripple Labs, known as Zakinov vs. Ripple. During the hearing, the oral arguments reportedly dealt with the testimony of the class of XRP holders suing Ripple.
On April 25th tweetDeaton complained that the sitting judge would not allow a friend (“friend of the court”) to testify during oral arguments. But he acknowledged that this was established court policy, not a hearing decision.
Ripple and XRP
The California hearing concerned XRP holders who own or trade the cryptocurrency. Prosecutor Bradley Sostak requested that a lead plaintiff be appointed in the case. Seeks to represent the interests of all XRP holders in the class action lawsuit. Sostak originally filed the case back in 2020, even though he only owned XRP for two weeks.
Prosecutors accuse Ripple of violating securities laws by selling XRP as an unregistered security. Controversially, the session also covers secondary and international sales. Moreover, they include jurisdictions where altcoins are classified as “non-security”.
But there is nothing close to unanimous on the merits of the suit. XRP holders also include customers who support Ripple in its argument against the US financial regulator, the Securities and Exchange Commission (SEC), that XRP is not a security. The lawsuit could drag on for months.
Sostak, the plaintiff, firmly believes that XRP is a collateral. But Ripple’s lawyers and some XRP holders question the significance of the Howey test, which is the SEC’s way of grading what is or isn’t. bloomberg story Last year I outlined Ripple’s argument that it makes no sense to treat tokens as securities in the absence of a contract.
The judge’s ruling on class approval of XRP holders will determine whether the lawsuit can proceed as a class action, potentially involving tens of thousands of XRP holders.
John Deaton is fighting on two fronts
On Monday, Coinbase asked the Securities and Exchange Commission for further clarifications in a separate lawsuit. This legal motion urges the Securities and Exchange Commission (SEC) to respond to Coinbase’s July 2022 petition regarding the cryptocurrency industry’s need for regulatory guidance.
A paid crypto attorney and Ripple advocate, Deaton has been active on more than one front. Deaton Books A recent tweet About the actions he took on behalf of the crypto industry. He just filed his second order on Mandamus on the Coinbase issue.
The first of Mandamus’ orders Deaton filed was in the context of the ongoing Ripple – SEC legal battle. Deaton became the first person to file Mandamus’ lawsuit against the SEC in defense of a crypto platform. Deaton’s order aims to prompt the SEC to amend its complaints against Ripple by limiting the focus to XRP coins sold by the blockchain payments company. The SEC accusations against XRP cite its sale as an unregistered security, and regulators have even gone so far as to charge secondary sales.
Crypto lawyers see similarities between all of the lawsuits. Deaton argued that the SEC could not continue to cite a single case to support its claims about the Howey test. The test, designed in 1946 and of questionable relevance in 2023, is still used to determine whether an asset qualifies as a security.
BeInCrypto has approached Deaton for comment.
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