The XRP community is getting excited about the possibility of a relisting after Paul Grewal, the Chief Legal Officer of Coinbase, indicated that he welcomed the idea of meeting Stuart Alderoty, the Chief Legal Officer of Ripple, “more often.”
This is the tweet from the Coinbase Chief Legal Officer that has the XRP community buzzing:
Earlier this week, Grewal discussed the conditions for potentially relisting XRP on Coinbase during a conversation with Ash Bennington on the “Crypto Daily Briefing” show by YouTube channel “Real Vision Crypto”. Grewal answered questions about Coinbase’s lawsuit against the US SEC, the legal environment for the US crypto industry, and its regulatory trajectory.
Bennington asked Grewal a question from Eri, a prominent XRP community influencer and host of the “Crypto Eri” YouTube channel, about the potential effect of a court ruling that secondary market sales of XRP are not securities on XRP’s listing on Coinbase.
Grewal highlighted that Coinbase continuously evaluates and reconsiders decisions related to asset listings on its platform. He mentioned that the exchange had to suspend XRP trading because of the U.S. SEC’s lawsuit filed in December 2020.
While XRP remains in litigation two years later, Grewal emphasized that the Coinbase team is closely monitoring Judge Analisa Torres’ decision on the case. However, Grewal clarified that a favorable ruling for XRP would not guarantee its relisting on Coinbase. He explained that Coinbase would assess the judge’s ruling, consider any subsequent appeals, and weigh the court’s decision before making any choices about relisting XRP.
On 2 April 2023, John Deaton, a well-regarded attorney closely following the U.S. SEC’s lawsuit against Ripple, offered his perspective on why XRP and ETH should not be classified as securities.
Deaton, the Managing Partner of Deaton Law Firm, founded CryptoLaw, a website dedicated to U.S. legal and regulatory updates for digital asset holders, and hosts the CryptoLaw YouTube channel.
In a series of tweets, Deaton explained the key concepts related to securities and their applicability to digital assets for his 258K followers.
Deaton first addressed the frequently misunderstood legal term “investment contract” and the incorrect application of the Howey Test on social media. He referred to the Securities Act of 1933, which defines “security” but does not explicitly include digital assets or software code. Deaton contends that in SEC cases involving digital assets like Telegram, Kik, LBRY, and Ripple, the relevant term is “investment contract.”
According to Deaton, the Howey Test suggests that a digital asset or cryptocurrency (software code) is not a security on its own. However, he admits that it can be promoted, offered, or sold as an investment contract, which could be classified as a security. Deaton emphasized that the GRAM token, XRP, and ETH are not securities, even though the ETH ICO was an unregistered securities offering, and Ripple may have occasionally offered or sold XRP as an unregistered security.
He stressed that the underlying asset – the digital code – is not a security, and there has never been a case in U.S. history where a secondary sale of such an asset was deemed a security. Deaton provided the example of the Howey Test, explaining that if an investor had sold the orange grove (from the Howey case) to a second buyer with no knowledge of the Howey Company, the subsequent sale would not be considered a security.
Deaton argued that even if the ETH ICO was a securities offering or Ripple sold XRP as a security between 2013 and 2018, neither ETH nor XRP is a security. He noted that all altcoins could be considered securities when first distributed, whether through an ICO or otherwise.
In closing, Deaton called on the industry to prevent the SEC and Bitcoin advocates from taking an unconstitutional shortcut by labeling tokens as securities.
Coinbase’s Chief Legal Officer concurred with Deaton’s view that secondary sales of digital assets should not be considered securities since there is no investment contract.
