US attorney says Howey is most misapplied legal test on Cryptocurrencies

On Apr 5, 2023

John Deaton shared his opinion on the “Howey Test” & investment contract” in-applicability on Cryptocurrencies.

John Deaton Managing Partner of Deaton Law Firm is the founder of CryptoLaw. Cryptolaw website is a fully crypto-focused legal team that maintains awareness about new legal policies on the crypto sector under the jurisdiction of the United States.

On 2 April 2023, Deaton took to Twitter to share his opinion on the misuse of the Howey Test on the cryptocurrencies like Bitcoin, Ethereum, and Ripple tokens by the United States Securities and Exchange Commission (SEC).

US Crypto attorney noted that crypto or say software code is not listed under the SEC act of 1933, so Howey Test isn’t applicable to cryptocurrencies.

currency, or, in general, any interest or instrument commonly known as a ‘‘security.”’

DIGITAL ASSET IS NOT LISTED. SOFTWARE CODE IS NOT LISTED.

In all of these digital asset SEC cases (@Telegram, #Kik, @LBRYcom, @Ripple) the only relevant term is “investment contract.”
— John E Deaton (@JohnEDeaton1) April 2, 2023

Further, Deaton said that crypto assets like Gram token, XRP, ETH are not security despite Ethereum’s ICO project constituting an unregistered securities offering and the Ripple team sold XRP tokens on many occasions.

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Crypto attorney noted that in the history of the US, the sale of any asset in the secondary market was never considered a security.

But even if true, it doesn’t make the underlying asset – digital code – a security itself.

Most important: when dealing with an investment contract, there hasn’t been a single case in U.S. history where the secondary sale of that asset was also found to be a security. NEVER.
— John E Deaton (@JohnEDeaton1) April 2, 2023

According to Deaton distribution of every crypto asset in the crypto sector via ICO or direct launch in a secondary marketplace was unregistered security offerings, including Bitcoin.

Every Altcoin arguably starts out as a security when its first distributed, ICO or not. When Satoshi was the only miner of #Bitcoin (or one of a few) and had he offered 100K #BTC for sale for $100K USD, it would have been an unregistered securities offering.
— John E Deaton (@JohnEDeaton1) April 2, 2023

Deaton suggested crypto industry not allow Gary Gensler or the SEC agency to consider any crypto token security themselves.

“The industry can’t allow Gensler and the SEC snd #BTC    Maxis to keep pushing an unconstitutional shortcut by calling the tokens themselves as securities,” Deaton said.