Ripple has submitted a formal comment letter to the U.S. Securities and Exchange Commission (SEC), advocating for the establishment of a defined legal framework for crypto assets as an alternative to the agency’s current case-by-case enforcement approach. The company argues that a clear regulatory structure would provide necessary clarity for the industry while continuing to protect investors.
According to Ripple, the proposed “Regulation Crypto Assets” offers an opportunity to replace years of regulatory uncertainty, which has largely operated on an ad-hoc basis, with an established set of laws. The company emphasizes that this shift would not compromise investor protection, as existing regulations would still apply. Ripple’s core argument is that the investment contract itself, rather than the token, should be the focus of regulatory scrutiny. This perspective suggests that what an issuer promises and when those promises are fulfilled are the critical factors, moving away from subjective tests like decentralization.
Ripple has also proposed specific modifications to the SEC’s proposed rules. The company opposes a suggestion to limit the safe harbor rule (Rule 400) to issuers who have fully met their initial promises, arguing that buyers may no longer anticipate profits from abandoned projects. Furthermore, Ripple rejects the idea of categorizing tokens into distinct groups, such as “company-backed” and “network” tokens, warning that this approach could reintroduce the “implicit” promise standard that the SEC had previously moved away from.
In its filing, Ripple provided examples to illustrate its points. For instance, a company that allocates 5% of each sale to buy and burn its own token could be considered to have created an investment contract, as the automated process effectively promises to return revenue to holders. Ripple also suggests that the absence of a Form TR filing should not automatically create a presumption that a token is tied to an investment contract, to prevent such filings from becoming a de facto regulatory test.
Another area of proposed change targets Rule 500(b), which currently addresses secondary-market trades by overriding state law but excludes dealers without an end date. Ripple suggests amendments to provide a clearer framework for these transactions, particularly for registered dealers who currently need to seek state-by-state exemptions.
The company’s push for regulatory clarity comes after a period of significant market volatility and operational challenges stemming from its legal dispute with the SEC. In December 2020, the SEC sued Ripple, alleging that XRP was an unregistered security. Following this lawsuit, the price of XRP reportedly fell by approximately 70% within days, and its market value decreased by about $15 billion. Many exchanges that served U.S. customers subsequently delisted XRP or blocked access to it.
In contrast, a district court ruling in July 2023 stated that XRP, in itself, is not a security. This decision coincided with an increase of approximately $21 billion in XRP’s market capitalization, and major exchanges like Coinbase and Kraken reinstated XRP trading for U.S. customers on the same day. Stuart Alderoty, Ripple’s chief legal officer, highlighted the substantial financial burden of achieving such clarity, noting that Ripple spent over $150 million on legal costs.
Ripple’s comment letter also references a study by the National Cryptocurrency Association, which estimates that clearer regulations implemented between 2022 and 2026 could have coincided with between 382 and 1,518 additional U.S. token offerings, attracting between $325 million and $1.117 billion in capital. The study suggests that many projects might have otherwise raised funds internationally.
Despite these efforts, regulatory uncertainty persists. A recent Senate vote on September 15 failed to advance the Digital Asset Market Clarity Act, indicating the ongoing challenges in establishing comprehensive crypto legislation. The finalization of the SEC’s “Regulation Crypto Assets” and whether it may incorporate Ripple’s suggested modifications remain uncertain.
Why This Matters
The materials describe a narrow update: Ripple has filed a comment letter with the SEC supporting the agency’s proposed ‘Regulation Crypto Assets’. The finalization and specific details of the SEC’s ‘Regulation Crypto Assets’.
Broader Context
Source materials place the factual news in this context: Ripple’s comment letter to the SEC regarding proposed Regulation Crypto Assets.
