John Deaton, the founder of CryptoLaw and attorney for XRP holders, argues that the United States Securities and Exchange Commission (SEC) is taking advantage of the legal uncertainty surrounding cryptocurrency to redefine what constitutes an investment contract and common enterprise in the U.S. Deaton’s analysis in Bloomberg explores how the Ripple and LBRY lawsuits could impact the SEC’s enforcement of digital asset laws, the potential limitations of U.S. v. Howey, and the redefinition of investment contracts and common enterprise.
He notes that the famous SEC v. Howey case from 1946 defined securities, but could not have foreseen the complexities of modern digital commerce.
Deaton also disagrees with Chairman Gary Gensler’s approach to cryptocurrency regulation, stating that it deviates from the Howey decision and poses legal risks.
With regards to the Ripple XRP case, Deaton believes that district judge Analisa Torres is carefully considering the implications, particularly if the case is appealed. The case deals with fundamental issues of modern securities law, including the types of assets that fall under it. The SEC asserts that all sales of XRP constitute securities because of the digital asset’s “nature,” but Deaton disagrees and argues that nothing in the law supports the SEC’s claim about XRP.
He has all spoken to many XRP holders who do not view their purchase as an investment contract or joint venture.