XRP Case Sparks Warnings from John Deaton on Crypto Legal Future

February 3, 2025 by Bena Ilyas

• John Deaton warns that the SEC’s attempt to classify XRP as a security challenges decades of legal precedent, affecting the broader crypto space.
• Legal cases targeting DeFi developers, such as Roman Storm’s, could set dangerous precedents and stifle innovation in open-source technology.
• The regulatory crackdown on crypto, exemplified by “Chokepoint 2.0,” represents an escalating effort to restrict the industry and decentralized platforms.

John Deaton, attorney and founder of Crypto Law, recently issued a stark warning on social media, reminding the crypto community that the battle for the industry’s survival is far from finished.  

Deaton, a principal player in a battle for owners of cryptocurrencies’ rights, highlighted that the case filed with the SEC against Ripple wasn’t about the corporation in and of itself—but about stating XRP security in and of itself. Deaton insists that such an act overlooks 75 years of settled case precedent. As a litigator for over 75,000 owners of XRP in Ripple v. SEC, Deaton has been a driving force in a battle for transparency in what he sees as overreaching actions.

For most, Ripple case initially seemed to have been a single case. However, when similar cases began appearing on larger platforms, including Coinbase and Kraken, it became clear that the crackdown signified a broader attack on the crypto community. The escalation, “Chokepoint 2.0,” involves a move towards regulating cryptocurrencies with an even tighter noose, with entities including Caitlin Long of Custodia Bank clashing with the Federal Reserve in high-profile court cases.

Deaton’s new warning spotlights a new peril: lawsuits lodged with developers in the decentralized finance (DeFi) ecosystem. One such case is lodged with Roman Storm, a Tornado Cash developer, and two at the Samourai Wallet. All three cases involve Section 1960 of the U.S. Code concerning unlicensed money transmitters.

Traditionally, developers who don’t have direct access to user funds have not been considered transmitters of money. However, the Department of Justice (DOJ) recently took a diametric view, perhaps opening a dangerous precedent for the industry.

Deaton Warns SEC Case Threatens XRP and DeFi

“If Roman Storm is found guilty and stripped of even one day of freedom, the blow to DeFi innovation will be catastrophic,” Deaton wrote. His concern mirrors a growing fear that regulators will indirectly use such cases to discourage the development of open-source technology and decentralized platforms, including XRP.

While the community continues debating contentious issues, including approving spot Bitcoin ETFs and whether tokens constitute security, Deaton warns that the real danger of survival comes from such court cases. Storm’s case, and similar ones filed with DeFi builders, have the potential to redefine freedom and innovation in the cryptocurrency universe, and potentially affect XRP as well.

The resignation of SEC Chairman Gary Gensler recently has shed a glimmer of hope for a few, with speculations that a regulative strain could ease with his resignation. Deaton, nevertheless, cautions not to become complacent. “The battle for crypto’s future is not yet over,” he added, urging the community not to become complacent and proactive in defending the industry.

As the crypto world braces for the outcomes of these critical legal battles, the message from John Deaton is clear: the industry must unite and prepare for a prolonged struggle to secure its future.

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