• Legal expert John Deaton has provided his insights into the ongoing controversy surrounding the sales of XRP by Ripple executives.
• A critical document submitted to the U.S. Securities and Exchange Commission (SEC) argues that XRP does not meet all the criteria of the Howey Test—a legal standard employed in the U.S. to classify transactions as securities.
• The document emphasizes that determining whether a transaction involves a security should not rely solely on its label, but rather on an evaluation of the transaction’s underlying economic realities.
Crypto Controversy: Deaton Weighs In On XRP’s Classification
Legal expert John Deaton has provided his insights into the ongoing controversy surrounding the sales of XRP by Ripple executives, sparking debate about whether or not it meets all criteria of the Howey Test—a legal standard employed in the U.S. to classify transactions as securities.
Analysis Submitted To The SEC Argues That XRP Does Not Meet Criteria Of The Howey Test
A critical document recently posted on Twitter was sent to the U.S. Securities and Exchange Commission (SEC), presenting an analysis of XRP and asserting that it does not meet all criteria of the Howey Test for securities classification. The document states that determining whether a transaction involves a security should not rely solely on its label, but rather on an evaluation of its underlying economic realities, such as features, terms, original development, distribution, current functionality, usage, and role of initial promoters. It therefore contends that XRP should not be categorized as an “investment contract” or a “security” under either Act and argues substantial grounds to conclude this based upon its analysis.
Document Deemed Privileged Reveals SEC’s Undisclosed Analysis
The Twitter user Steven Mizrahie who shared this document suggested if it were authored by SEC itself then their case would be significantly weakened; however Marc Fagel clarified that Ripple’s attorneys had drafted this document with inputs from SEC staff which makes it privileged information since it reveals SEC’s undisclosed analysis regarding XRP and its classification as security or non-security asset per US laws & regulations .
Decoding The Economic Realities
The analysis puts forth several points related to understanding economic reality behind any given financial instrument including digital assets like crypto currencies & tokens before classifying them into security or non-security assets . Such points include examining features , terms , original development , distribution & current functionality along with usage & role played by initial promoters while assessing any given financial instrument for security or non-security status .
Conclusion
Legal expert John Deaton has weighed in on this controversy around Ripple’s sales of XRP through public submissions revealing undisclosed analyses from SEC staff challenging its classification as a security under applicable laws & regulations . This brings light to how financial instruments need to be evaluated based upon their underlying economic realties instead of taking labels at face value .