In a recent Twitter thread, pro-Ripple lawyer John Deaton presented a strong case arguing that the US Securities and Exchange Commission (SEC) is wrong in tagging XRP coin as a security.
Deaton challenges the SEC’s claim by referencing statements from Bill Hinman, Director of the Division of Corporation Finance at the SEC, who said in 2018 that a digital asset is more likely to be considered a security if it is “sold as part of an investment – to non-users – by promoters.”
Deaton argues that this does not apply to XRP holders, many of whom acquired the coin to establish a TrustLine with the XRPLedger for value transfer or to pay salaries through BitPay and other vendors.
Deaton also points to the SEC’s own framework for digital assets, which states that crypto is unlikely to satisfy the Howey test (which determines if an asset is a security) if “it can immediately be used to make payments in a wide variety of contexts, or acts as a substitute for real (or fiat) currency.”
Ripple XRP And Other Government Agencies
The lawyer goes on to highlight statements from other government agencies, such as the US Government Accountability Office (USGAO) and FinCEN, that have classified XRP as a virtual currency.
He also references a 2015 settlement between Ripple and FinCEN & the DOJ, which forced Ripple to comply with banking laws rather than securities laws and required the company to hire an independent third-party auditor to provide the government with annual audits of all XRP sales for five years.
Deaton argues that the SEC’s approach to crypto has been inconsistent and contradictory, referencing the fact that the SEC staff were allowed to own and trade XRP until April 2019.
The agency took no action when MoneyGram filed a disclosure with the SEC in 2019, informing them that Ripple was going to be transferring XRP to them for use in their cross-border payments business.
He also suggests that there is more non-public information that will further support Ripple’s case. John Deaton said:
What I’ve discussed above is public. It doesn’t take into consideration the non-public information. Now, wait until we see the Hinman emails and drafts of the speech.
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