- Paul Grewal, Chief Legal Officer at Coinbase, agrees with Attorney John Deaton on what constitutes an investment contract.
- Deaton’s stance on investment contracts could affect the ongoing SEC lawsuit against Ripple and the relisting of XRP on Coinbase.
Paul Grewal, the Chief Legal Officer at Coinbase, recently expressed his agreement with Attorney John Deaton on the definition of an investment contract. The debate on the nature of investment contracts has resurfaced amid calls for Coinbase to relist XRP, Ripple’s cryptocurrency, after the latest remarks.
Grewal’s comments were made in response to Deaton’s detailed explanation on why digital assets sold on the secondary market cannot be considered securities or investment contracts. In his response, Grewal echoed Deaton’s position, stating that for something to qualify as an investment contract, it must involve an “investment” and a “contract.” These terms have been defined by Congress and interpreted by the Supreme Court, and based on the established legal definitions, secondary sales of digital assets neither include investments nor contracts.
In his amicus curiae brief in the SEC’s case against its ex-employee Ishan Wahi, Coinbase shared its stance on investment contracts. While the exchange did not support Wahi’s actions, it clarified that the assets in question are not securities as Coinbase does not list securities. Grewal further shared the amicus brief from March 13, which reiterated Coinbase’s position that digital assets sold on the secondary market are not investment contracts.
Grewal’s latest comments have reignited calls for Coinbase to relist XRP as the exchange’s stance implies that XRP is not a security, as alleged by the SEC. Grewal had disclosed last month that even if Ripple wins the SEC case, Coinbase will still need to assess the situation before re-enabling XRP trading.
Attorney Deaton, who serves as an amicus curiae for thousands of XRP holders in the SEC case, once again clarified why secondary sales of digital assets are not securities. He cited the Securities Act of 1933, which outlines what makes up a security, and 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.
In summary, Grewal’s and Deaton’s stance on what constitutes an investment contract could have a significant impact on the ongoing SEC lawsuit against Ripple and the relisting of XRP on Coinbase. Their position could potentially shape how the court interprets the laws surrounding digital assets and securities, which may have wider implications for the crypto industry as a whole.