XRP Is Not A Security? Pro-Crypto Lawyer Hints At Huge Unraveling In Ripple vs SEC CaseJuly 7, 2023
Outspoken pro-Ripple lawyer John Deaton has expressed optimism regarding the SEC vs Ripple lawsuit, predicting that Judge Torres will thoroughly address the core question of whether XRP is a security in her upcoming summary judgment.
In a Twitter thread on Monday, Deaton firmly asserted that “XRP IS NOT A SECURITY.” He then established parallels between XRP and diverse assets like orange groves, whiskey, condos, and even Bitcoin (BTC). Deaton’s argument centred on the notion that despite these assets being marketed and sold as investment contracts, their inherent characteristics remained unaltered.
“BTC was once sold as an investment contract (SEC v. Shavers), but that particular sale didn’t transform BTC into anything other than what it is: a digital commodity,” he stated.
Further, contrary to the belief of many experienced lawyers, Deaton asserted that Judge Torres would not shy away from addressing the issue of secondary sales concerning XRP.
“I believe Judge Torres has to address the underlying asset and secondary market sales. Could she avoid the issues and issue a ruling? Of course she could. But it would be a greater act of judicial activism to ignore the SEC’s theory and NOT address these issues,” he said.
To support his argument, Deaton referred to a similar case handled by Judge Castel in 2020 involving the Telegram messaging app. This legal dispute began when the SEC intervened and halted Telegram’s intended distribution of GRAM tokens. However, Judge Castel ruled in favour of the SEC, stating that Telegram had to repay investors $1.2 billion from their unsuccessful initial coin offering (ICO) for the Telegram Open Network.
It is important to remember that the theory posited by the SEC was that Ripple engaged in continuous activity resembling an ICO, considering each sale of XRP as part of a broader plan involving securities. However, Deaton clarified that the situation with XRP differed from the Telegram case because the latter involved an ICO with written contracts.
Deaton further contended that XRP, powered by the XRP Ledger (XRPL) technology, had been operating effectively and openly traded for over seven years. Notably, even SEC staff members were permitted to own XRP until 2019, which was not the case with the Gram token.
The issue of secondary market transactions of XRP has been a crucial aspect in the SEC and Ripple legal battle. While the SEC accused Ripple of offering XRP as an unregistered security, it did not clearly distinguish between Ripple’s direct sales and the subsequent trading on the secondary market, leading to confusion. Recently, Deaton opined that Judge Torres might address this issue based on a previous examination in the SEC vs LBRY lawsuit, as it sheds more light on the issue.
That said, while there’s no guarantee, Judge Torres’ summary judgment decision could shed light on XRP’s security classification, potentially impacting the crypto industry significantly.
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