The classification of XRP as a security has once again taken center stage in the cryptocurrency world, reigniting a long-standing legal and ideological debate. The controversy was reignited by outspoken tech investor Jason McCabe Calacanis during an episode of the All-In Podcast, where he declared that XRP is a "centrally controlled security" — a statement that quickly drew a sharp rebuttal from John Deaton, a prominent pro-crypto attorney and vocal advocate for XRP holders.
This clash between influential figures underscores the broader uncertainty surrounding digital asset regulation, particularly as the U.S. Securities and Exchange Commission (SEC) continues its high-stakes legal battle with Ripple Labs. At the heart of the discussion lies a fundamental question: Is XRP a security, a currency, or something in between?
Jason Calacanis’ Bold Stance on XRP
Jason Calacanis, known for his sharp insights in the tech investment space, made headlines with his unequivocal position on XRP’s regulatory status. On the All-In Podcast, he argued that unlike decentralized cryptocurrencies such as Bitcoin, XRP operates under centralized control — primarily by Ripple Labs — which, in his view, disqualifies it from being considered a true cryptocurrency.
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Calacanis emphasized that if the SEC were to approve an XRP ETF, it would set a dangerous precedent, potentially undermining the very foundation of securities law. He warned that such approval could enable large stakeholders — including startups and venture funds — to offload massive amounts of XRP onto retail investors, destabilizing U.S. capital markets and eroding global confidence in American financial systems.
His argument hinges on the idea that centralized control equates to an investment contract, a key criterion under the Howey Test used by U.S. courts to determine whether an asset qualifies as a security. By this logic, Calacanis believes XRP fits the definition of a security due to Ripple’s dominant role in its issuance, distribution, and network governance.
John Deaton Counters with Legal Expertise
Enter John Deaton, a lawyer who has become a household name among XRP supporters due to his relentless advocacy in the Ripple vs. SEC lawsuit. Deaton swiftly responded to Calacanis’ claims, offering to educate him on the nuances of securities law and why XRP does not meet the legal threshold of a security.
Deaton stressed that while Ripple Labs played a significant role in XRP’s creation and initial distribution, the token itself functions independently within a decentralized network of validators. He pointed out that over 150 independent entities currently operate validators on the XRP Ledger, reducing reliance on any single organization.
Moreover, Deaton highlighted his personal conviction in digital assets — revealing that 80% of his net worth is invested in Bitcoin — underscoring that his support for XRP is not driven by bias but by legal and technological analysis. He maintains that XRP’s utility as a medium of exchange, particularly in cross-border payments, distinguishes it from traditional securities.
“Just because a company creates a digital asset doesn’t automatically make it a security,” Deaton stated. “We must look at how the asset is used in practice — not just who created it.”
His position aligns with Ripple’s core defense: that XRP was never sold as an investment but rather distributed as a tool for fast, low-cost international transactions.
The Ripple vs. SEC Lawsuit: A Regulatory Crossroads
The legal battle between Ripple Labs and the SEC remains one of the most consequential cases in crypto history. Filed in December 2020, the lawsuit centers on whether XRP constitutes an unregistered security under U.S. law.
The SEC argues that Ripple conducted an unregistered securities offering by selling XRP to raise capital — particularly through institutional sales — thereby violating federal securities regulations. In contrast, Ripple contends that XRP is not a security, citing its widespread use as a currency and its existence on an open-source, decentralized ledger.
In July 2023, a partial victory for Ripple came when Judge Analisa Torres ruled that XRP is not inherently a security, especially when sold on public exchanges to retail investors. However, the court also found that certain institutional sales did constitute securities offerings.
This nuanced decision has fueled ongoing debate about how context affects classification — a critical point for regulators, developers, and investors alike.
Centralization vs. Decentralization: A Broader Crypto Dilemma
The XRP debate reflects a deeper tension within the cryptocurrency ecosystem: the balance between centralization and decentralization.
Bitcoin maximalists often argue that true blockchain value lies in decentralization — no single entity should control supply, issuance, or validation. From this perspective, XRP’s origins with Ripple and its reliance on recommended validators raise red flags.
Yet supporters counter that practical utility sometimes requires coordination. For enterprises adopting blockchain for real-world applications — such as banks using XRP for cross-border settlements — a degree of structure ensures reliability, compliance, and scalability.
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XRP’s design prioritizes speed and efficiency, settling transactions in under four seconds with minimal fees. These features make it attractive to financial institutions seeking alternatives to SWIFT. In this light, critics may view centralization as a flaw — but proponents see it as a feature tailored for enterprise adoption.
Key Takeaways and Industry Implications
The outcome of the Ripple-SEC case could set a precedent affecting hundreds of other digital assets with centralized development teams or initial funding mechanisms. If tokens like XRP are deemed securities based solely on their creation or early distribution methods, it could stifle innovation and force projects underground or offshore.
Conversely, a favorable ruling for Ripple might encourage clearer regulatory frameworks, allowing blockchain projects to innovate without fear of arbitrary enforcement actions.
Frequently Asked Questions (FAQ)
Q: Is XRP considered a security by U.S. regulators?
A: The SEC claims that some sales of XRP were unregistered securities offerings, but a federal judge ruled that XRP itself is not inherently a security — especially when traded publicly.
Q: What is the Howey Test, and does it apply to XRP?
A: The Howey Test determines if an asset qualifies as an investment contract (i.e., a security). It looks for investment of money in a common enterprise with expectations of profit from others’ efforts. Courts are still assessing whether this applies to XRP based on context.
Q: Can XRP be used for real-world payments?
A: Yes. XRP is widely used in cross-border transactions through Ripple’s On-Demand Liquidity (ODL) solution, offering faster settlement and lower costs than traditional banking systems.
Q: How does validator centralization affect XRP’s security status?
A: While Ripple recommends certain validators, over 150 independent nodes participate in securing the network. This growing decentralization weakens arguments that Ripple maintains unilateral control.
Q: What happens if Ripple loses the SEC lawsuit?
A: A loss could lead to stricter regulations on token distribution, higher compliance costs for crypto firms, and potential delisting of XRP from U.S.-based exchanges.
Q: Why does John Deaton support XRP despite investing heavily in Bitcoin?
A: Deaton supports both assets based on their technological merits and legal distinctions. He believes Bitcoin and XRP serve different purposes — one as digital gold, the other as digital currency — and both can coexist legally.
Final Thoughts: The Future of Crypto Regulation
As the debate over XRP’s classification intensifies, it highlights the urgent need for clear, consistent cryptocurrency regulations in the United States. The clash between Calacanis’ cautionary stance and Deaton’s legal defense illustrates how deeply divided opinions remain — even among crypto-savvy experts.
What’s clear is that the regulatory landscape is evolving, and decisions made today will shape tomorrow’s innovation. Whether XRP is ultimately deemed a security or not may matter less than the precedent it sets for how digital assets are evaluated under U.S. law.
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For investors, developers, and policymakers, understanding these nuances isn’t optional — it’s essential. The XRP saga isn’t just about one token; it’s about defining the future of finance in a digital age.
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XRP security status, Ripple vs SEC lawsuit, John Deaton, Jason Calacanis, cryptocurrency regulation, decentralized ledger, cross-border payments