No Precedent for Crypto Sales as Investment Contracts, Says Lawyer

Legal Complexities in Crypto Sales

Determining whether a crypto sale constitutes an investment contract remains an unresolved issue, with no clear precedents. This complexity is highlighted in the ongoing legal battle between Ripple and the U.S. Securities and Exchange Commission (SEC). Pro-XRP lawyer John Deaton emphasizes that in 76 years of investment contract cases, no ruling has classified the underlying asset itself as a security.

Lack of Historical Precedents

Deaton's conclusion arises from thorough research and expert analyses, challenging the SEC's stance on Ripple's sale of XRP. He points out that historical cases do not support the SEC’s position that the mere sale of XRP constitutes an investment contract. This perspective is further supported by the works of experts like Lewis Cohen, who argues against the classification of fungible crypto assets as securities.

The Role of Transaction Circumstances

The determination of whether a crypto sale is an investment contract relies heavily on the transaction's circumstances. Deaton asserts that factors such as the relationship between the buyer and the promoter are crucial. Notably, there have been no cases where an investment contract was identified without privity between the involved parties.

Judicial Challenges

The legal proceedings are further complicated by differing views within the legal community. Crypto lawyer Bill Morgan notes that Judge Analisa Torres must decide if Ripple's sale of XRP qualifies as a security. Despite the SEC's broader claims, Judge Torres' decision will hinge on specific evidence, some of which faces admissibility challenges.

In conclusion, the lack of precedents and the complex nature of crypto transactions continue to pose challenges in legally defining crypto sales as investment contracts. This case could set significant legal benchmarks for the crypto industry.