Will Coinbase Relist XRP? As Coinbase Chief Legal Officer Agrees With Deaton “Investment Contracts” Argument

Paul Grewal pointed out that Deaton’s stance on what constitutes an investment contract is similar to Coinbase’s position.

Paul Grewal, Chief Legal Officer at Coinbase, has noted that he agrees with Attorney John Deaton on what constitutes an investment contract. Notably, calls for Coinbase to relist XRP have re-emerged after the recent remarks.

Grewal recently made these comments in response to Deaton’s latest elaborate explanation on why digital assets sold on the secondary market cannot be considered securities or investment contracts. Resounding Deaton’s position, Grewal noted that, for something to qualify as an investment contract, it must involve an “investment” and a “contract.”

Mr. Deaton is exactly right. “Investment contracts” must include both “investment” and “contracts” as those terms are set out by Congress and interpreted by the Supreme Court. Neither is present when it comes to secondary sales of digital assets. https://t.co/9iWYrWwpiI

— paulgrewal.eth (@iampaulgrewal) April 2, 2023

Grewal stated that these terms have been defined by Congress and interpreted by the Supreme Court. He pointed out that, based on the established legal definitions of these terms, secondary sales of digital assets neither include investments nor contracts.

A secondary sale refers to the sale of an asset, such as a stock, bond, or digital asset, between two parties who are not the original issuer of the asset.

Grewal further shared a file to its amicus brief from March 13 in the SEC’s case against its ex-employee Ishan Wahi on the grounds of insider trading involving securities. Wahi pleaded guilty to the insider trading allegations but maintained that the assets involved are, in fact, not securities.

Coinbase’s amicus brief echoed this stance. While the exchange did not notably support Wahi’s actions in the amicus brief, it sought to clarify that the assets in question are not securities, as “Coinbase doesn’t list securities.”

Following Grewal’s latest remarks call for Coinbase to relist XRP emerged since the exchange’s stance implies that XRP is not a security, as alleged by the SEC. As reported by The Crypto Basic Grewal disclosed last month that even if Ripple wins the SEC case, Coinbase will still make some assessments before re-enabling XRP trading.

Deaton on Investment Contracts

Attorney Deaton, who serves as an amicus curiae for thousands of XRP holders in the SEC case, once again took to clarify why secondary sales of digital assets are not securities. Deaton cited the Securities Act of 1933, which outlined what makes up security. He pointed out that the act does not mention digital assets, as they are merely computer codes.

Moreover, he noted that the Supreme Court’s definition of investment contracts in the 1946 case between the SEC and Howey does not include digital assets. Deaton clarified that, while digital assets can be marketed and sold as securities, it does not make them inherently securities. He noted that XRP and ETH could have been sold as securities at some point, but that does not make them securities by nature.