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Attorney Deaton has predicted that Venture Capitalists (VCs) will support smart cryptocurrency legislation.
Crypto-Law.US founder John Deaton has speculated that venture capitalists (VCs) will support smart and tailored crypto regulations following Judge Torres’ decision in the SEC v. Ripple lawsuit.
“[…] I could see VCs running to support smart, tailored legislation,” said Deaton. Attorney Deaton made this known in response to an inquiry from Digital Asset Investor, a prominent XRP influencer.
DAI that’s why I said I could see VCs running to support smart, tailored legislation because before Judge Torres’ ruling they probably felt very comfortable that they got a pass because they are “sophisticated investors.” But like I’ve said several times since the XRP ruling,…
— John E Deaton (@JohnEDeaton1) August 8, 2023
Impact of Ripple Ruling on VCs and Institutions
Yesterday, Digital Asset Investor called on Deaton to comment on how the Ripple ruling affects institutional clients and VCs.
“Hey John Deaton, I haven’t heard you say how the Ripple verdict affects institutions and VCs that were issuing and accepting tokens post Hinman speech because they thought they had cover,” the influencer noted.
Furthermore, the XRP influencer recounted how ConsenSys had a so-called Token Foundry, which it used to issue many tokens. Digital Asset Investor stated that some VCs used different models to accept tokens.
In response, Attorney Deaton said the Ripple ruling has shown that the Howey factors do not care about investors’ level of sophistication.
Before the Ripple ruling, VCs and institutional clients were comfortable, thinking that they “got a pass” for being “sophisticated investors.” However, these investors had to come to terms with reality after Judge Torres issued her decision in the Ripple lawsuit.
Recall that Judge Torres found that Ripple’s past direct sales to institutional investors are securities. Per Judge Torres, XRP sales to institutional clients are securities because these investors expected to profit directly from Ripple’s efforts.
Meanwhile, she ordered that programmatic sales on secondary markets are non-securities, as retail investors did not have similar expectations as institutional clients.
With the ruling affecting VC’s protection, Attorney Deaton speculated they would be prompted to support smart, tailored legislation.
VCs Supported SEC Against Ripple
Notably, Deaton said it is ironic how VCs who bought tokens from ConsenSys and participated in Ethereum ICO supported the SEC case against Ripple.
The prominent crypto advocate added that these VCs labeled XRP a security. Interestingly, Deaton urged the companies to exercise caution while supporting the SEC.
“Well, be careful what you support and ask for because strictly applying the Howey test to the token sales you reference to hedge funds and VCs [will] constitute an investment contract, aka a security,” he added.
It bears mentioning that Ethereum co-founder Vitalik Buterin urged ETH enthusiasts not to come to Ripple’s defense. According to Buterin, XRP lost its right to protection when its community attempted to throw Ethereum under the bus.