Defying the U.S. Securities and Exchange Commission’s (SEC) claims that XRP is a security, Uphold, which is a global multi-asset digital trading platform, has remained steadfast in its support for the embattled digital asset.

On December 22, 2020, the U.S. Securities and Exchange Commission (SEC) filed an action against Ripple Labs Inc. and two of its executives, alleging that they raised over $1.3 billion through an unregistered, ongoing digital asset securities offering. The fallout from the lawsuit saw major crypto exchanges like Coinbase and Kraken suspend XRP trading, with Coinbase announcing the suspension on December 28, 2020, and Kraken following suit on January 15, 2021.

However, Uphold did not delist XRP. On April 4, Uphold reminded the XRP community of its unwavering support for the digital asset:

John Deaton, a prominent attorney closely monitoring the SEC’s ongoing lawsuit against Ripple, praised Uphold’s decision not to suspend trading, saying it was a “very smart business decision.” Earlier today, Uphold took to Twitter again, this time to thank the XRP community:

Deaton is the founder of CryptoLaw, a website focusing on U.S. legal and regulatory developments for digital asset holders, and the host of the CryptoLaw YouTube channel.

On April 2, Deaton took to Twitter to explain key concepts related to securities and how they apply to digital assets. He addressed the legal term “investment contract” and the misapplication of the Howey Test on social media. Deaton argued that in SEC cases involving digital assets like Telegram, Kik, LBRY, and Ripple, the relevant term is “investment contract.”

According to Deaton, a digital asset or cryptocurrency, by itself, is not a security. However, it can be marketed, offered, or sold as an investment contract, which can be considered a security. Deaton asserted that tokens like $GRAM, $XRP, and $ETH are not securities, even though the $ETH Initial Coin Offering (ICO) was an unregistered securities offering, and Ripple may have offered or sold $XRP as an unregistered security on specific occasions.

Deaton emphasized that the underlying asset – digital code – is not a security, and there has never been a case in U.S. history where the secondary sale of that asset was found to be a security. He used the SEC v. Howey Co., 328 U.S. 293 (1946) case as an example, explaining that if an investor sold the orange grove (from the Howey case) to a second buyer with no knowledge of the Howey Company, the subsequent sale would not be considered a security.

Deaton’s argument is that regardless of whether the $ETH ICO was a securities offering or Ripple sold $XRP as a security between 2013 and 2018, neither $ETH nor $XRP is a security. He pointed out that every altcoin could be considered a security when first distributed, whether through an ICO or not.

In conclusion, Deaton urged the industry not to allow the SEC and Bitcoin proponents to take an unconstitutional shortcut by labeling tokens themselves as securities.