The classification of tokens by the U.S. Securities and Exchange Commission (SEC) has been a source of controversy among leaders in the digital asset industry. However, during a recent hearing of the LBRY lawsuit, the SEC acknowledged that the token itself is not a security.
In response, attorney John Deaton, who is involved in the XRP Lawsuit, argued that the SEC’s narrative of calling the token a security needs to be challenged.
He contended that a token is simply software code and can be treated as any other commodity or asset, including being packaged, marketed, offered, and sold as a security. Deaton emphasized that the term “investment contract” is about the conditions surrounding the offer and sale of the underlying asset, not the asset itself.
He cited the Telegram case, where Judge Castel determined that the GRAM token was not a security but rather an “alphanumeric sequence.” Additionally, the Hinman Ethereum speech acknowledged that the digital asset is just code.
Recently, Coingape reported on the Unseal Hinman Speech documents and Email motion, which have gained support from a government watchdog called Empower Oversight in the XRP lawsuit.
According to the XRP lawyer, they were able to compel the SEC to admit in its opposition brief that XRP is computer code, but there is no federal lawsuit finding that subsequent transfers of the asset are securities transactions.
He further added that no appellate court has ever held the underlying asset subject to an investment contract transaction is itself an investment contract.