Crypto controversy: Deaton delves into XRP classification and sparks legal debate

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Legal expert John Deaton, well known for his expertise in the field, has given his opinion on the ongoing controversy surrounding the sales of XRP by Ripple executives.

Critical documents appear on Twitter

In a significant development, Twitter user Steven Mizrahie recently posted a critical document, coinciding with the submission of public redacted versions of cross motions for summary judgment by the parties involved. The document, sent to the United States Securities and Exchange Commission (SEC), presents an analysis of XRP and claims that the crypto asset does not meet all the criteria of the Howey Testa legal standard used in the United States to classify transactions as securities.

Deciphering economic realities

The document emphasizes that determining whether a transaction involves a security should not be based solely on its label, but rather on an assessment of the underlying economic realities of the transaction. Through a comprehensive analysis of features, terms, original development, distribution, current functionality, usage and the role of its original promoters, XRP contends that there are substantial grounds to conclude that XRP does not fulfill not all items of the Howey test.

Read more about it: Ripple News Vs SEC: XRP Challenges State of Security with Howey Analysis Memo!

Therefore, he argues that XRP should not be classified as an “investment contract” or a “security” under the Securities Act or the Exchange Act.

Twitter debate

Steven Mizrahie, the Twitter user who shared the document, suggested that if the SEC was the author of the document, the Commission’s case would be significantly weakened. However, fellow Twitter user Marc Fagel clarified that Ripple’s memoir indicated that an unidentified third party authored the document. Fagel, who did not have access to the exhibit itself, was unable to verify the identity of the document’s author.

John Deaton intervenes

That’s when John Deaton decided to speak out on the matter. XRP attorney John Deaton responded by stating that the document was not drafted by SEC staff. He revealed that the document, dated June 13, 2018 and authored by SEC staff, was classified as privileged and therefore not shared with Ripple.

No. This is not written by SEC staff. The one written by SEC staff dated June 13, 2018 was deemed privileged and was not forwarded to the Ripple. This was a third party sending their analysis to the SEC.

— John E Deaton (@JohnEDeaton1) June 13, 2023

Instead, the document made public was a third-party analysis, which was sent to the SEC.

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