The classification of XRP as a security continues to spark intense debate within the cryptocurrency community, reigniting discussions about regulation, decentralization, and market integrity. Recently, high-profile tech investor Jason McCabe Calacanis made strong statements on the All-In Podcast, asserting that XRP is a centrally controlled security—a claim that has drawn immediate backlash from John Deaton, a well-known pro-crypto attorney and advocate for XRP holders.
As the Ripple vs. SEC lawsuit progresses, these public disagreements underscore the complexity surrounding digital asset classification and highlight growing tensions between centralized infrastructure and regulatory expectations.
Jason Calacanis’ Stance on XRP
Jason Calacanis, a respected figure in Silicon Valley and early-stage tech investing, recently voiced concerns about XRP's regulatory standing. During an episode of the All-In Podcast, he argued that XRP fundamentally differs from decentralized cryptocurrencies like Bitcoin due to its centralized control structure. According to Calacanis, Ripple Labs maintains excessive influence over XRP’s issuance, distribution, and network governance—factors he believes align closely with the definition of a security under U.S. law.
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He went further by warning that if the U.S. Securities and Exchange Commission (SEC) were to approve an XRP-based exchange-traded fund (ETF), it would set a dangerous precedent. Such approval, he claims, could undermine the foundational principles of securities regulation by allowing centralized entities to tokenize assets without meeting traditional investor protection standards.
Calacanis also raised concerns about market stability. He suggested that major stakeholders holding large XRP positions might offload them onto retail investors through an ETF structure, potentially destabilizing markets and weakening global confidence in American financial systems.
His commentary reflects long-standing skepticism toward tokens associated with centralized development teams. Critics often point to Ripple’s historical role in funding development, managing escrow accounts, and promoting use cases as evidence of undue control—key factors in the SEC’s broader enforcement actions.
John Deaton Counters with Legal Clarity
In response, John Deaton—an attorney deeply involved in the Ripple vs. SEC litigation—publicly challenged Calacanis’ assertions. Known for representing thousands of individual XRP holders, Deaton emphasized that labeling XRP a security isn’t as straightforward as some critics suggest.
Deaton clarified that while Ripple Labs played a significant role in XRP’s creation and early distribution, the token now operates independently across a decentralized network of validators. He stressed that U.S. securities law hinges not just on control but on the economic reality of how an asset is sold and used. Under the Howey Test—the legal framework used to determine whether an asset qualifies as a security—Deaton argues that retail purchases of XRP do not constitute investment contracts because buyers aren’t relying on Ripple’s efforts for profit.
Moreover, Deaton highlighted his personal stake in digital assets: approximately 80% of his net worth is invested in Bitcoin, underscoring his credibility as a blockchain advocate rather than a corporate apologist. His defense of XRP stems from concern for individual investors who acquired the token in good faith, only to face regulatory uncertainty.
He also warned that misclassifying XRP could have ripple effects across the crypto industry, potentially subjecting other utility-focused tokens to similar scrutiny—even those with semi-centralized origins.
The Ripple vs. SEC Lawsuit: A Regulatory Crossroads
At the heart of this debate lies the ongoing legal battle between Ripple Labs and the SEC. Filed in December 2020, the lawsuit centers on whether XRP qualifies as an unregistered security. The SEC alleges that Ripple conducted an illegal $1.3 billion offering by selling XRP to raise capital—an action they claim fits the definition of a securities sale.
Ripple counters that XRP functions more like a currency than a security, pointing to its widespread use in cross-border payments and liquidity solutions. They argue that most secondary market transactions occur independently of Ripple, with no expectation of profit derived from Ripple’s managerial efforts.
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In July 2023, a partial victory for Ripple came when a federal judge ruled that XRP is not inherently a security when sold on public exchanges to retail investors. However, institutional sales were found to potentially meet the criteria under certain circumstances. This nuanced decision has fueled continued discussion about context-dependent classification—an idea gaining traction among legal scholars and regulators alike.
The final outcome could redefine how digital assets are regulated in the U.S., setting precedents for future cases involving Ethereum, Solana, and other major platforms.
Centralization vs. Decentralization: A Broader Crypto Dilemma
Beyond XRP specifically, this controversy touches on a fundamental tension in blockchain technology: centralization versus decentralization.
Bitcoin maximalists often argue that true digital money must be fully decentralized—free from corporate oversight or centralized decision-making. From this perspective, any token linked to a single entity risks compromising trustless operation and censorship resistance.
However, supporters of XRP counter that practical applications—especially in enterprise finance—require coordination and reliability that pure decentralization may not provide. XRP’s design enables fast settlement times and low transaction costs, making it attractive for banks and payment providers exploring blockchain integration.
This functional utility challenges the notion that centralization automatically equates to being a security. Instead, advocates call for a more nuanced regulatory approach—one that evaluates purpose, usage patterns, and economic function rather than focusing solely on governance structure.
What’s Next for XRP?
As court proceedings continue and public opinion remains divided, the future of XRP hangs in balance. Regulatory clarity remains elusive, but momentum appears to be shifting toward recognizing distinctions between different types of digital assets.
Industry stakeholders are increasingly calling for legislation that defines categories of crypto assets—utility tokens, payment tokens, securities—rather than applying one-size-fits-all rules. Such frameworks could protect investors while fostering innovation.
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Meanwhile, exchanges continue listing XRP, institutional interest persists, and global adoption grows—particularly in regions embracing blockchain for remittances and financial inclusion.
Frequently Asked Questions (FAQ)
Q: Is XRP considered a security by U.S. regulators?
A: The legal status is still evolving. In a 2023 ruling, a U.S. judge determined that XRP is not a security when sold to retail investors on exchanges. However, institutional sales may fall under securities regulations depending on context.
Q: What is the Howey Test?
A: The Howey Test is a legal standard used by U.S. courts to determine if a transaction qualifies as an “investment contract,” which falls under securities law. It examines whether there’s an investment of money in a common enterprise with an expectation of profit from others’ efforts.
Q: Why does centralization matter in crypto regulation?
A: Centralized control can suggest reliance on a single entity for value appreciation—key to the Howey Test. Regulators scrutinize whether developers or companies exert enough influence to make token holders dependent on their actions.
Q: Can XRP ever get approved for an ETF?
A: While possible, ETF approval would require clear regulatory acceptance of XRP as a non-security asset. Current uncertainty makes approval unlikely in the near term unless further court rulings or legislation provide clarity.
Q: How does Ripple defend XRP’s non-security status?
A: Ripple argues that XRP operates independently of the company in secondary markets and serves primarily as a medium of exchange—not an investment vehicle—especially for retail users.
Q: What impact could the Ripple vs. SEC case have on other cryptocurrencies?
A: The case could establish critical legal distinctions between utility tokens and securities. A favorable outcome for Ripple might encourage innovation and clearer compliance paths for other blockchain projects.
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