In SEC emails, Ripple's XRP Still Doesn't Meet SEC's Security Standards
XRP, the cryptocurrency once issued by US fintech firm Ripple, has never fully met the Security and Exchange Commission’s (SEC) definition of a security, a citation from what some believe is an SEC email suggests.
According to an excerpt of the email, which was released by pro-Ripple lawyer John Deaton on Twitter this weekend, the SEC might have been aware that XRP did not pass the so-called Howey test, which is used by the government to determine whether an asset should be regulated as a security or not.
“[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 email said.
It also added that it in the author’s view is “more likely than not” that XRP is not a security, and thus will “not be subject to regulatory oversight by the SEC.”
The text is reportedly taken from internal communication at the SEC, but it is unclear who exactly wrote the part about XRP not satisfying the Howey test.
Still, in the tweet where he shared a screenshot of the document with the email excerpt found in the footnote, Deaton called the revelation “HUGE.”
The SEC initially took legal action against Ripple in December 2020, alleging that the sale of its XRP token represented an unregistered securities offering.
Ripple has denied XRP is a security, arguing it does not satisfy the Howey test, which is used to assess whether a transaction meets the criteria of a security.
The footnote, which Deaton believes comes from a third-party outside of the SEC, stated:
“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.”
In a May 22 Twitter Spaces hosted by Fox Business journalist Eleanor Terrett, Deaton argued this “clearly states” that XRP was discussed because “somebody at the SEC cited this person saying it is not a security, or they forwarded the email within the email chain.”
“I’m 95% confident that the statement, reasonable grounds etc, is someone other than the SEC official…it’s still big news, it’s in these litigation emails, it proves what we all thought.”
While Deaton noted that the SEC “made no comment on the record” if XRP was ever internally discussed, he did reiterate that back in June 2018, XRP was the third largest crypto asset behind Bitcoin BTC and Ether ETH.
In former SEC director William Hinman’s speech, he stated Bitcoin and Ethereum were not securities, and it “appears that some at the SEC may have believed XRP should be treated no differently than Bitcoin and Ethereum,” according to Deaton.
“Someone shared that market participants did not believe XRP was a security,” he said, adding:
“Everything that an XRP holder has been shouting for the past couple of years, it has absolutely confirmed that XRP has been discussed.”
In comments to Cointelegraph, Deaton pointed out that the clear giveaway was its citation, “SEC-LIT,” whereas other emails referenced were cited as “SEC-PROD.”
He further explained that these documents were “the Hinman emails and speech drafts” that the SEC objected to producing, but the documents were still required to be litigated.
https://cointelegraph.com/news/ripple-footnote-xrp-not-security-john-deaton