Ripple Urges SEC to Finalize Crypto Asset Regulatory Framework
Ripple advocates for clear rules to replace case-by-case enforcement and legal uncertainty.
1Formalizing Regulatory Frameworks
Ripple has officially submitted a comment letter supporting the SEC’s proposed Regulation Crypto Assets. The company argues that replacing current case-by-case enforcement with an established legal framework is essential. This shift aims to provide industry-wide clarity while maintaining necessary investor protections under existing securities laws, moving away from subjective interpretations.
2Defining Investment Contracts
The proposal centers on the principle that the investment contract, not the token itself, constitutes a security. Stuart Alderoty, Ripple’s chief legal officer, emphasizes that this approach remains faithful to the 1946 Howey test. The focus should remain on issuer promises and contract endpoints rather than subjective decentralization metrics.
3Proposed Safe Harbor Mechanisms
Rule 400 introduces a safe harbor allowing issuers to file Form TR to certify that promised work is finished or abandoned. Ripple disagrees with limiting this to completed projects, noting that abandoned work also negates profit expectations. They suggest that failing to file should not automatically imply an investment contract.
4Rejecting Arbitrary Token Categorization
Ripple warns against splitting tokens into company-backed and network categories. They argue this revival of implicit promise standards contradicts the SEC’s 2026 interpretation. For instance, code that automates revenue returns to holders, such as buy-and-burn mechanisms, inherently creates an investment contract regardless of how the token is categorized.
5Leveraging Existing Statutory Authority
The filing highlights Section 28 of the Securities Act and Section 36 of the Exchange Act as tools for the SEC to exempt classes of securities. Ripple asserts that the failed September 15 Senate vote on the Digital Asset Market Clarity Act does not diminish the commission's existing power to act.
6Addressing Secondary Market Hurdles
Ripple targets Rule 500(b) for its failure to provide a clear end date for secondary-market trades. Currently, the rule excludes certain dealers, forcing them to seek state-by-state exemptions. This creates unnecessary operational friction for registered dealers, highlighting the need for a more unified federal approach to secondary market trading.
7The Cost of Legal Ambiguity
Ripple’s position is informed by its own legal battle, which cost over $150 million to achieve clarity. Following the December 2020 lawsuit, XRP lost $15 billion in market value and faced widespread delisting. Conversely, the July 2023 ruling that XRP is not a security added $21 billion to its market cap.
8Economic Impact of Regulation
Clearer rules could have significantly boosted US capital formation between 2022 and 2026. Data suggests that regulatory certainty might have enabled up to 1,518 additional token offerings and over $1 billion in capital. Without these changes, many projects continue to raise funds abroad to avoid the current domestic regulatory environment.
Original article: CryptoPotato — Ripple Urges SEC to Finalize Crypto Asset Regulatory Framework