- John Deaton, a pro-XRP lawyer, discovered a footnote in a Ripple legal document from 2022 indicating that discussions about XRP took place among SEC staff prior to the Hinman speech, which could influence the outcome of the ongoing SEC vs Ripple lawsuit.
- The footnote from a third-party source suggests that there are reasonable grounds to conclude that XRP does not satisfy the Howey Analysis, hence it might not be deemed a ‘security’ under federal securities laws.
A Crucial Footnote Found in Ripple Legal Document
An overlooked footnote in a Ripple opposition brief from 2022 could potentially affect the outcome of the ongoing dispute between Ripple and the U.S. Securities and Exchange Commission (SEC), according to John Deaton, a lawyer with a positive outlook on XRP. On May 22, Deaton announced on Twitter that he had noticed a small but potentially significant footnote in a Ripple legal document. It appeared to confirm that discussions about XRP took place among SEC staff before the notable Hinman speech.
Read this short 🧵 please. When you look at all the other SEC-LIT-EMAILS cited in Ripple’s opposition, they are redacted. The one about there being reasonable grounds to not believe XRP satisfies all the Howey factors is not redacted. https://t.co/qoaCbjk7rg pic.twitter.com/Nc6kfNMJ4c
— John E Deaton (@JohnEDeaton1) May 21, 2023
The Significance of Internal SEC Discussions on XRP
This revelation could have substantial implications as any internal disagreements among SEC officials regarding XRP’s status as a security could potentially sway the ongoing litigation between the U.S. regulator and Ripple. The SEC filed a lawsuit against Ripple in December 2020, claiming that Ripple’s sale of its XRP token constituted an unregistered securities offering.
Ripple, on the other hand, has consistently rejected the assertion that XRP is a security. It argues that XRP fails to meet the criteria of the Howey Test, a test used to determine whether a transaction qualifies as a security. The footnote Deaton highlighted, believed to originate from a third-party source, states that there are reasonable grounds to believe that XRP does not fulfill all elements of the Howey Analysis and, therefore, should not be classified as a ‘security’ under federal securities laws.
In a Twitter Spaces session on May 22, hosted by Eleanor Terrett, a Fox Business journalist, Deaton stated that this quote clearly indicates that XRP was indeed discussed. He said,
“someone at the SEC cited this person saying it is not a security, or they forwarded the email within the email chain.”
Although Deaton acknowledged that the SEC made no official comment on whether XRP was ever discussed internally, he reminded that in June 2018, XRP was the third-largest cryptocurrency after Bitcoin and Ethereum. Following the Hinman speech, in which Bitcoin and Ethereum were not classified as securities, Deaton suggests that some at the SEC may have thought XRP should be treated in a similar fashion.
He concluded by stating that we will discover the extent of the impact this could have on the case on June 13, when the Hinman materials are likely to be unsealed.