- Ripple urged the SEC to stop applying outdated rules to crypto assets like XRP.
- Ripple pushed for Congress-led regulation and proposed a “maturity” test to assess token status.
Ripple ramped up the pressure against the U.S. Securities and Exchange Commission (SEC), calling for the regulator to end the application of outdated rules to crypto tokens such as XRP. The call followed a letter Ripple filed with the SEC’s Crypto Task Force as a response to Commissioner Hester Peirce’s “New Paradigm” speech, drawing attention to the need for uniform legal perimeters in the digital assets market.
In their letter, the company based in San Francisco made the claim that the majority of fungible crypto assets like XRP do not qualify as security when traded in secondary markets. Ripple is convinced those assets are not tied legally to the definition of security when there is no promise or obligation attached to them from the initial sale.
Ripple pointed specifically to the decision made by Judge Analisa Torres in the SEC vs. Ripple case during the month of July 2023. The ruling established that XRP is not a secondary market security even though sales by institutions had been under the jurisdiction of the laws regarding securities. Ripple is now advocating for legislation that is more reflective of such a nuanced judicial finding, rather than overbroad standards that do not fit the crypto sector.
Call for Congress to Lead as SEC Faces Scrutiny
Ripple’s chief legal officer, Stuart Alderoty, is criticizing the SEC for trying to form new regulations without authority. He is highlighting the fact that it is up to Congress, not regulators, to enact legislation for this industry.
“Regulatory clarity must come from lawmakers, not regulators overstepping their authority,” said Alderoty.
In order to fill the existing gaps, Ripple pushed for a new standard of law. It comprises a “maturity” test to determine when a digital token qualifies as a discrete asset rather than as an investment contract. The proposed test looks at the size of the market, the life of the network, and the degree of control any single party would have over the network.
The firm also warned against assumptions over the delivery of mere tokens or general statements during the sales of tokens. In the absence of a promise from the issuer not kept or enforceable rights for the token holder, the asset should no longer be subject to securities law. Ripple supports a good-faith safe harbor for projects, but does not believe that necessarily implies such tokens are securities.
Ripple’s ETF Hopes Tied to Legal Clarity
One of the possible motivations for Ripple’s calls for definite rules is an upcoming XRP-based ETF. Clearing the regulatory haze is regarded as essential for such a product to be approved. No official filing has yet been made, said industry watchers, but Ripple’s recent actions are viewed as paving the way.
The ongoing legal battle for XRP began when the SEC filed its complaint back in December 2020. While Ripple did initially gain a partial victory with Judge Torres’s 2023 decision, the absence of a complete resolution on everything means that the door is kept open for further arguments.
