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Pro-XRP attorney John Deaton recently shared insights on how Ripple could sell XRP in the U.S. for ODL without legal problems.
John Deaton, pro-XRP lawyer and Managing Partner at Deaton Law Firm, recently shared insights on the legality of Ripple’s On-Demand Liquidity (ODL) transactions. The attorney revealed how Ripple could facilitate ODL transactions in the U.S. without legal issues.
Can Ripple Now Sell XRP Abroad?
Deaton’s remarks responded to a question in the latest CryptoLaw AMA session. A user had asked if Ripple could sell XRP directly outside the U.S. following Judge Torres’ ruling.
AMA with John Deaton https://t.co/uFE9ZIVlKY
— CryptoLaw (@CryptoLawUS) August 22, 2023
In response, Deaton confirmed that Ripple always had permission to sell XRP abroad without legal issues. This is because the U.S. SEC’s jurisdiction is limited to the United States.
The attorney stressed: “In order for the SEC to have jurisdiction over the sale of a potential security, it has to be within the United States of America.”
As a result, the regulatory agency had no legal right to oversee sales of XRP abroad. Deaton emphasized that this is why Ripple argued in its defense that 95% of its XRP sales were outside the U.S.
Deaton noted that Ripple sold XRP directly outside the U.S. before Judge Torres’ ruling. In the aftermath of the verdict, the firm can still sell XRP abroad without legal issues.
Sales Within the US
However, issues arise when Ripple sells XRP in the United States. Recall that, in her verdict on July 13, Judge Analisa Torres ruled that Ripple’s past XRP sales to institutions constituted unregistered securities.
Commenting on Deaton’s latest remarks, Digital Asset Investor, a prominent XRP community figure, shared a hypothetical situation that could legally help Ripple facilitate XRP sales within the U.S..
He theorized that Ripple could sell XRP to an institution abroad, say the Bank of England (BoE). Afterward, the BoE could then sell the XRP to an American institution, such as the Bank of America (BoA), for ODL.
Deaton confirmed that this pattern would be within legal bounds. He stressed that, with ODL, institutions do not interact with XRP as a security but as a bridge currency. The lawyer cited a speech from SEC Chair Gary Gensler while he was at MIT.
Yes. Plus, as you know DAI, ODL transactions utilize XRP – not as an investment- but as a bridge currency – in a way exactly described 👇 by @GaryGensler in 2018, while at MIT.
So if BOE transfers/sells XRP to BOA for ODL purposes, they are not investments as a matter of law…
— John E Deaton (@JohnEDeaton1) August 22, 2023
According to Deaton, if the BoE sells XRP to the BoA, it would not constitute an investment contract because the institutions involved would only handle XRP for three to five seconds.
The legality of ODL Sales
He argued that it would be unreasonable for anyone to claim they expected to make profits within a short timeframe. Deaton noted that such XRP transactions do not satisfy any Howey factor.
David Schwartz, Ripple’s CTO, made similar remarks when concerns about Ripple’s ODL sales emerged. Schwartz assured that Ripple facilitates ODL transactions without a U.S. nexus. As a result, the verdict from Judge Torres does not affect its ODL sales.
He noted that Ripple has no issues keeping ODL outside the U.S. However, if they wish, they could conduct it inside the U.S. if the XRP used in the sales does not come directly from the company.