John Deaton, a prominent member of the cryptocurrency legal community and an advocate for XRP, has identified the primary risk that Ripple faces as a result of the SEC lawsuit.

This observation comes as the whole cryptocurrency world continues to follow the development of the Ripple-SEC case. Deaton’s remarks were made in response to a tweet about the Howey test made by crypto enthusiast Mr. Huber, who goes by the handle @Leerzeit.

What Deaton Says

A statement that Mr. Huber made was related to the Howey test. He said that it did not matter if some of the investors elected to hire services other than those offered by Howey-in-the-Hills to care for the groves since section 5 prohibits the offer of unregistered securities as well as the sale of such securities.

Therefore, the breach of section five entails not only the selling of unregistered securities but also the offering of such securities for sale. According to Deaton, the possibility that Ripple faced the most risk in the SEC complaint was due to the fact that the company had sold unregistered securities.

The Howey Test, established by a landmark Supreme Court decision in 1946 and mentioned in the SEC complaint against Ripple, defines the conditions for assessing whether a financial arrangement qualifies as an investment contract and so is subject to federal securities legislation.

Deaton’s words were:

“I’ve said this is the biggest danger to Ripple. I actually predicted it would be the focus of the SEC’s motion for summary judgment. The SEC argued it it but not as much as I predicted. The SEC didn’t go transaction by transaction on sales, so the ‘offer’ is the biggest danger.”

In related developments, the Financial Supervisory Service (FSS) of South Korea is apparently keeping an eye on the legal dispute between the SEC of the United States and the cryptocurrency startup Ripple (XRP). The Ripple lawsuit has the potential to alter how crypto assets are categorized throughout the globe significantly.

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