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- Attorney John Deaton argues that digital assets like XRP can be sold as securities in the primary market but not in the secondary market.
- This perspective could potentially lead to a settlement in the SEC vs. Ripple case.
Digital assets as securities in the primary market
John Deaton, a proponent attorney for Ripple, asserts that while digital assets like XRP and Bitcoin are not inherently securities, they can be treated as such when they are exchanged in the primary market. This viewpoint opens up the possibility of a resolution between Ripple and the US Securities Exchange Commission (SEC).
Can we get something straight. Digital assets themselves are NOT securities, any more than an🍊was in Howey, or #BTC was in Shavers, or 🦫s were Kemmerer, or Chinchillas were in Miller v. Chinchilla, or condos were in SEC Rel. No. 33-5247. Crypto assets can be sold as a security.
— John E Deaton (@JohnEDeaton1) May 10, 2023
Examining each transaction for XRP sales
Deaton emphasizes the need to scrutinize individual transactions in both primary and secondary sales involving XRP. Although digital assets are not securities by themselves, the specific circumstances of each sale must be evaluated to determine if they should be classified as securities.
According to Deaton, digital assets such as XRP and Bitcoin do not meet the criteria to be considered securities based on the Howey Test. However, in the context of a sale involving XRP, the asset can be treated as a security during the transaction. Therefore, both primary and secondary market sales require examination by the SEC to determine their classification.
The attorney supports his argument by referencing similar legal cases. He points to the SEC vs. LBRY case, in which the judge ruled that secondary sales of LBRY Credits (LBC) tokens should not be classified as securities sales.
The significance of this development lies in its potential impact on the SEC’s case against Ripple. If XRP is acknowledged as not being a security in itself but capable of being “sold as one,” the outcome of the legal battle could change. Drawing parallels to the LBRY case, where the SEC recognized that secondary sales of LBRY tokens did not constitute securities sales, a settlement with similar implications becomes more likely for Ripple.
For supporters of Ripple and XRP, this development could be seen as a positive outcome. In a potential settlement, XRP may be considered a security only in primary sales conducted by Ripple and its executives, while sales in the secondary market could be exempt from this classification. This distinction would have significant implications for the regulatory status and trading of XRP.