Web3 lawyer John Deaton discovered a footnote in documents that confirms the SEC discussed the possibilities of XRP not meeting the requirements of the Howey test.

Though the SEC did not comment on the record, Deaton believes the statement confirms what the crypto community has expressed for years.

XRP Army and other digital asset executives share their views on the lingering court case stating how it would shape regulation in the industry.

The legal tussle between Ripple and the Securities and Exchange Commission (SEC) takes a new turn as web3 lawyers and digital asset users scrutinize a new revelation concerning the case. 

Pro-XRP lawyer John Deaton has stated that a small footnote that he discovered in Ripple’s brief could play a key role in determining the merits of the case. On May 22, Deaton explained on Twitter that the footnote confirmed a conversation between staff of the SEC concerning Ripple “prior to the Hinman speech.”

“There are reasonable grounds to conclude that XRP does not satisfy all elements of the Howey Analysis and is therefore not a ‘security’ for purposes of the federal securities laws,” the footnote reads. 

This is a potential game changer as internal debates within the Commission on XRP not being a security could switch the dynamics and narrative. The US regulator charged Ripple alongside two of its executives Brad Garlinghouse and Christian Larsen for issuing $1.3 billion in “unregistered securities.” 

Ripple has consistently denied these claims insisting that it does not meet up the requirements for the Howey Test, the age-long test used by regulators to determine if assets fall under securities. 

Meanwhile, Deaton stated that this proves “what we have said for years.” 

“Everything that an XRP holder has been shouting for the past couple of years, it has absolutely confirmed that XRP has been discussed,” he added. 

More speculations as legal tussle nears end

New developments in the case including the recent ruling on the Hinnan document have been debated in crypto circles. Deaton believes that there are parts that will hinder Ripple’s shot at victory, although it still looks promising.

“I think the chances of Ripple getting a complete victory are much slimmer after reading this than I felt before. I still don’t think the SEC is getting a complete victory either,”  he added. 

Deaton explained that Judge Torres might decide to fine the company for its early sale of XRP and other transactions but not on subsequent sales as that does not amount to securities. Similarly, Marc Fagel, a former SEC security lawyer added that while secondary markets were helpful to prove the Commission’s case, “Torres would be overstepping to make a ruling on secondary sales.” 

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Filed under: Bitcoin - @ May 27, 2023 1:48 pm