In the legal dispute between the US Securities and Exchange Commission (SEC) and Ripple Labs, Judge Analisa Torres has issued a first ruling, but it is not the preliminary ruling. Instead, the judge issued a 57-page ruling on both sides’ motions to exclude expert testimony from a preliminary injunction (“Daubert Motions”).
On the face of it, neither Ripple nor the SEC is winning. The SEC’s motions are partially granted and partially denied, and Ripple’s motions are partially granted and partially denied.
In this context, Scott Chamberlain, a former attorney and co-founder of Evernode XRPL, mention, “Neither side gets everything it asked for because neither side had an impeccable case for everything it wanted. What is striking is how sharp, rigorous and completely impartial Judge Torres is.
Here’s what the ruling means for Ripple
As Chamberlain explains, no clear winner or loser can be deduced from the ruling. However, victory goes to Ripple when it comes to one of the key outcomes of the ruling, the exclusion of the #1 expert witness, Patrick Doody. This is who the SEC hired to analyze XRP buyer expectations.
XRP Community Advocate Jeremy Hogan noticed on Twitter that the SEC needs to prove that investors had a “responsible” profit expectation from Ripple’s efforts, because Doody was crucial:
And the judge just struck down the SEC’s ONLY expert witness on that subject. So, now, how on earth can the SEC prove a “reasonable” dependency? Who will testify? Just think out loud. 🙂
A ruling in favor of the SEC was made by Judge Torres on Expert Witness Number 3, who called Ripple “irrelevant and unreasonably prejudicial.” The judge acknowledges that the expert’s testimony “on defendants’ incentives and actions to influence the price of XRP is directly relevant” to the final element of the Howey test for an investment contract.
In this regard, Hogan writes that the judge believes that “Expert #3’s opinion regarding Ripple’s incentives and actions to influence the XRP price is relevant to the issue of reasonable profit expectation.” But, seems pretty weak sauce to me.”
Another of the many bad outcomes for the SEC from the Daubert challenges is that SEC attorneys tried to get Judge Torres to bar XRP community attorney John E. Deaton from participating in the case, in part because he used the name of their witness. expert revealed. Instead, she not only banned Deaton, but agreed with him that Doody should not testify on behalf of XRP holders.
More arguments for Ripple
Another attorney for the XRP community, Bill Morgan, has also found some arguments as to why the judge’s rulings could easily have been in Ripple’s favour.
Like Morgan writesIn its summary judgment, the SEC alleged at least six actions Ripple took to boost the price of XRP. Related to this, the SEC also lost power because the judge overruled Dr. Metz denied that Ripple’s announcements caused the XRP price surge.
In addition, Morgan is “satisfied” that most of Alan Schwartz’s report has been allowed. This is relevant to the “Blue Sky” question. Schwartz gets to testify about Ripple’s contracts and how they differ from the Howey contracts. “That’s important,” Morgan said.
Furthermore, the judge accepted that the contracts and their conditions were relevant to the question of whether there was an investment contract. She noted that Schwartz’s evidence is relevant to that analysis. Morgan went on to say:
I was also encouraged that the judge accepts that the use of XRP is relevant to the investigation into Howey’s third point. I found Adriaen’s opinion on this matter that the judge allowed to be more important than the two opinions she denied.
So all in all, it’s not an outright win for Ripple, but it’s certainly encouraging. The XRP price has reacted cautiously to the release, rising 2.4% in the past 24 hours. At the time of writing, XRP was trading at USD 0.3786.
Featured image by Sergeitokmakov/Pixabay, chart from TradingView.com