John Deaton, a renowned pro-crypto lawyer and legal representative for XRP holders, has emphasised the importance of understanding the context of the Howey test and Investment Contract that are frequently used by regulatory agencies such as the SEC to define securities. Deaton stipulates that the method of distribution, such as through an ICO, by itself does not make the digital asset itself a security, regardless of whether it has been labelled as unregistered securities.

Deaton points out that the 'Investment Contract' term is extremely misunderstood and argues that the same concept could be applied to a situation such as when Satoshi Nakamoto offered to sell 100,000 Bitcoin for $100,000 when he was the only or among one of the few Bitcoin miners. Although Bitcoin and other coins are now perceived as commodities or a launching pad for other financial services through its network, a few years ago, it could have qualified as a security too.

The lawyer also comments on the other (altcoins) distributed through different forms, referring to the Ethereum example. He says that, from the regulators' point of view, practically any altcoin can be considered as a security at the time of its launch. Due to the highly regulated and sensitive nature of the cryptocurrency market, understanding the terms and conditions to prevent cases of fraud is essential. John Deaton hopes that the SEC will revise its regulations in order to better comprehend the distinctions between commodity, security and currency.



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