John Deaton, managing partner of the Deaton Law Firm and Massachusetts Senate candidate, has been a vocal critic of the U.S. Securities and Exchange Commission (SEC). His support for cryptocurrency users stems from his involvement in a 2021 legal brief filed against the SEC regarding the classification of XRP, a digital asset associated with Ripple Labs.
The SEC’s logical flaw
In an interview with David Lin, Deaton explained the essence of his legal arguments that challenge the SEC's position that XRP should be considered a security. He said this marks a historic precedent because the SEC claims that the underlying asset itself - XRP - is a security, not just the investment contracts that can be derived from it. Deaton emphasized that traditionally, assets such as Bitcoin, gold and even real estate can be marketed as securities, but these assets themselves do not have this classification.
“The SEC’s position is unprecedented,” he said. “They are arguing that even if someone buys XRP on an exchange and doesn’t know who Brad Garlinghouse or Ripple is, it can still be classified as a security. This logic is fundamentally flawed because it ignores the nature of the asset itself.”
Collective action by XRP token holders
Deaton’s legal action began with a lawsuit against the SEC, which he filed with other plaintiffs. He sought to intervene in the case, and his motion was supported by 5,000 XRP token holders. Judge Torres made a landmark ruling that referenced Deaton’s statements and previous library cases in which he was involved, ultimately ruling that XRP itself is not a security.
Speaking of his motivations, Deaton revealed: “At the time, most of my assets were in Bitcoin. I participated in this case pro bono because I was angry about government overreach and the misconduct of certain people at the SEC.”
Deaton also expressed concern about Massachusetts Senator Elizabeth Warren’s recent anti-cryptocurrency stance, especially her call for a Federal Reserve central bank digital currency (CBDC). He said: “I am puzzled that Senator Warren would focus on cryptocurrency among so many pressing issues. I realize that she has ambitions for a CBDC, which is concerning.”
