Hester Peirce admitted that her colleagues focused on XRP instead of the conditions surrounding the token’s sales.
In a recent tweet, XRP-Pro attorney John Deaton knocked the SEC for arguing that XRP represents both the common enterprise and the expectation of profit prongs of the Howey Test. Deaton expressed surprise that the SEC could reach such a conclusion despite not evaluating each transaction individually.
“The SEC doesn’t go transaction by transaction and argues that #XRP embodies or represents both the common enterprise and expectation of profits prongs of the Howey test,” said Deaton.
The founder of Crypto Law backed his comment by saying that even SEC Commissioner Hester Peirce (sometimes called Crypto Mom) admitted that her colleagues made a wrong call in evaluating XRP as a security.
According to Deaton, the SEC commissioner acknowledged that her colleagues at the SEC performed a shorthand analysis of XRP, which led them to focus on the token itself instead of the conditions surrounding the token sales.
@HesterPeirce admitted that her colleagues at the @SECGov perform a “shorthand” analysis and focus on the token itself instead of the circumstances surrounding the offering and sale of the token (ie “the contract, transaction or scheme”).
— John E Deaton (@JohnEDeaton1) February 3, 2023
Deaton further referenced a paper by Lewis Cohen, which evaluates all securities cases in the US since the Howy lawsuit. Based on Lewis’ article, Deaton said, “no federal appellate court has ever ruled that the underlying asset is a security.”
“Lewis’ article shows that no federal appellate court has ever held that the underlying asset subject to an investment contract transaction is itself an investment contract,” Deaton remarked.
Peirce and Grundfest Slam the SEC
Meanwhile, Peirce is known for constantly pushing for favorable regulations for the crypto space, even if it means calling out the SEC. Last year, Crypto Mom slammed the Securities and Exchange Commission for failing to provide clearer regulations for crypto despite several pleas.
It is noteworthy that Peirce is not the only SEC Commissioner that has condemned the agency’s focus on the underlying asset instead of the circumstances surrounding the sale of the token.
In October, former SEC Commissioner Joseph Grundfest reminded the SEC that the Supreme Court never ruled that the orange was the security in the Howey case. According to Grundfest, the court ruled that Howey’s “complete package” was security.