NEW DELHI (CoinChapter.com) — Legal experts have slammed the US Securities and Exchange Commission’s (SEC) inconsistent tactics in its ongoing legal battle with Ripple Labs.
Amycus curiae in the lawsuit, John E. Deaton posted on Twitter regarding the SEC’s “schizophrenic theory” and “insane arguments.”
Deaton was commenting on SEC’s take on the definition of common enterprise. In detail, defining a common enterprise is a part of the Howey Test in determining if an asset is a security.
Law Insider defines it as an enterprise in which the investor’s fortunes are tied to the “efficacy of the efforts and successes of those seeking the investment or of a third party.“
However, the US Circuit courts have failed to find common ground on the common enterprise part of the Howey test.
Deaton stated that the SEC’s theory on common enterprise was schizophrenic
Replying to a tweet by Ripple’s chief legal officer, Stuart Alderoty, Deaton called the SEC’s take on what constitutes a common enterprise schizophrenic. Initially, the SEC tried to prove that Ripple Labs was the common enterprise gaining from unlicensed sales of XRP tokens.
Later, the regulatory watchdog argued that the entire XRP ecosystem was the common enterprise, treating exchanges, token holders, and firms accepting the token as payments as part of the ecosystem. The commission produced an expert witness to support its theory.
However, the Judge excluded the expert’s testimony based on nearly 3,000 affidavits submitted by Ripple on behalf of XRP token holders.
Now, the SEC claims that XRP tokens represent the common enterprise.
SEC’s Stance On Common Enterprise, If Accepted, Could Apply To Other Cryptos
Alderoty had noted that SEC’s inconsistent stance on common enterprise was evident in the 1994′ Revak v. SEC Realty Corp case.
The Revak case exposes yet another SEC sleight of hand. Without a “common enterprise” it matters not whether “the fortunes of investors” are tied to the efforts of others. The Howey test is not “so easily satisfied.”
Furthermore, the Ripple CLO stated that the SEC had failed to establish that “an investment in a ‘common enterprise’ was unnecessary provided there was a ‘community of interest‘” in the original Howey lawsuit. “The SEC was wrong then, and it is still wrong now,” Alderoty tweeted on May 13.
Bill Morgan stated that the SEC lawsuit should be tossed out.
Furthermore, a pro-crypto lawyer, Bill Morgan, stated that the SEC was trying to “stretch” the Howey test to include cryptocurrencies. Echoing Deaton’s sentiments, Morgan suggested that courts dismiss the SEC’s case due to its failure to satisfy the common enterprise prong of the Howey test.
Moreover, Morgan noted that the SEC’s argument that the XRP’s fungibility made it a common enterprise since all XRP tokens rise and fall simultaneously was flawed. The lawyer noted that fungibility represented common interest, not common enterprise.
Additionally, Morgan stated that the fungibility argument applied to “an ounce of gold,” indicating the flaw in SEC’s reasoning.
XRP Price Moving Inside Bullish Triangle Pattern
Meanwhile, XRP price has formed a bullish technical pattern called the ‘Ascending Triangle. ‘
A horizontal trendline that connects swing highs and an ascending trendline connecting swing lows forms an ascending triangle pattern. Volume helps determine if a breakout is strong.
XRP price is moving inside a bullish triangle setup with a 174% price target. Source: Tradingview.com
Under ideal conditions, buyers would enter the market as the trendlines close the gap, pushing prices above horizontal resistance with heavy volumes. Unfortunately, a low-volume breakout on the upside will likely fail, resulting in a pullback.
Per the rules of technical analysis, the price target for a breakout is equal to the triangle’s height at its thickest point. Therefore, the XRP price might rise 174% to $1.16 if it confirms the pattern.
Looming Death Cross Adds To Bearish Pressure Against XRP
XRP extended its May losses to 11.2% as the token dropped nearly 2% to form a daily low near $0.42 on May 16. The Ripple token had been crabbing below its 200-day EMA (green wave) after the token flipped the EMA trendline on May 9.
Moreover, a looming death cross between XRP’s 20-day EMA (red wave) and 100-day EMA (blue wave) might add to the bearish pressure against the token. A death cross is a bearish pattern trader often consider an indicator of negative market sentiment.
XRPUSD daily chart with RSI and a potential death cross. Source: Tradingview.com
Increased selling pressure could force the XRP price to drop to its support level near $0.415. Moreover, breaching its immediate support might result in the XRP price falling to test support near $0.396. The Ripple token price last saw $0.396 in late March 2023.
Meanwhile, the RSI for XRP is nearing oversold levels, clocking at 35.27 on the daily charts. Oversold RSI levels usually precede a bullish trend reversal for an asset. Hence, buyers might enter the market once the RSI drops below 30.
Bulls must break above the 200-day EMA resistance near $0.434 to establish a strong rally. Moreover, breaking above the immediate resistance could help XRP price target its 50-day EMA (purple wave) resistance near $0.457 before retreating.
A Delhi-based Markets writer, I did my bachelor's in engineering with major in electronics and communications. I first heard of bitcoin while writing an article about blockchain technology a few years back, and have been following it ever since. Bitcoin may well be current big thing happening in the finance industry, and it feels like the right time to join the crypto bandwagon.
