Attorney John Deaton reaffirms Ripple’s non-security status, highlights differences with the GRAM token, and expects Judge Torres to address secondary market sales in the ongoing Ripple vs. SEC case.
Managing Partner at Deaton Law firm and attorney John Deaton underlined that XRP is not a security. Deaton, a well-known proponent of cryptocurrencies, found parallels between XRP and the GRAM token from Telegram, offering insight into the ongoing legal dispute between Ripple and the U.S. Securities and Exchange Commission (SEC).
Deaton expressed certainty that Judge Analisa Torres, who is presiding over the SEC vs. Ripple case, will address XRP secondary market transactions and the nature of the coin in her decision. This assertion confirms Deaton’s earlier remarks from last month, which suggested that Judge Torres would not disregard the underlying asset and the secondary transactions of XRP.
Deaton disagreed with other legal experts who believed that Judge Torres would not comment on the token. He argued that if Judge Torres chooses to overlook these crucial aspects, she would effectively bypass a significant portion of the SEC’s theory regarding XRP.
Contrasting Ripple Case With Telegram Lawsuit
Deaton pointed out the differences between the ongoing Ripple case and the previous lawsuit involving Telegram. Unlike Ripple, Telegram’s case revolved around a pure Initial Coin Offering (ICO) and written contracts. The SEC successfully obtained a preliminary injunction against Telegram on March 25, 2020.
Deaton highlighted that Judge Kevin Castel, presiding over the SEC vs. Telegram lawsuit, specifically addressed GRAM secondary market sales in his second decision. This was noteworthy as it indicated that reaching the secondary market was viewed as part of the scheme. Deaton acknowledged that some individuals may view Judge Castel’s ruling as potentially unfavorable for the Ripple case, speculating that Judge Torres could also consider Ripple’s intent to create XRP secondary markets as part of the alleged scheme.
Key Distinctions Between Ripple and Telegram
Deaton emphasized significant distinctions between Ripple and Telegram, particularly regarding the nature of their respective tokens. He pointed out that the U.S. Government Accountability Office never categorized GRAM as a virtual currency in 2014, whereas XRP had received such classification. Similarly, the Financial Crimes Enforcement Network (FinCEN) did not consider GRAM a virtual currency in 2015, unlike XRP.
Furthermore, Deaton noted that GRAM did not meet the criteria outlined in the SEC’s 2019 framework for digital assets, which XRP satisfied. This framework indicated that if XRP is used for immediate payments, it is unlikely to meet the criteria outlined in the Howey test. Additionally, the Financial Stability Oversight Council referred to XRP as a virtual currency in its 2019 report, but not GRAM.
Deaton also highlighted that MoneyGram did not utilize GRAM in June 2019, in contrast to its use of XRP in cross-border transactions. This was a significant point of differentiation, as MoneyGram had informed the SEC in 2019 of its intention to employ XRP in its business operations.
Attorney John Deaton firmly believed that Judge Analisa Torres would address both XRP secondary market sales and the token’s nature in her upcoming ruling for the SEC vs. Ripple case. Deaton stressed that neglecting these issues and the SEC’s theory would constitute an act of judicial activism. With the legal community eagerly awaiting Judge Torres’ decision, the outcome of the Ripple case could have significant implications for the classification and regulatory landscape of cryptocurrencies.
