Rewrite Ripple Calls on SEC to Modernize Crypto Regulation and Clarify XRP Status
Ripple is intensifying its call for regulatory reform, urging the U.S. Securities and Exchange Commission (SEC) to stop applying outdated legal frameworks to modern digital assets like XRP. The blockchain company is advocating for Congressional leadership and has proposed a new legal benchmark to determine when crypto tokens should be classified as securities.
Ripple Pushes for Clear, Updated Rules
In a formal response to SEC Commissioner Hester Peirce’s “New Paradigm” remarks, Ripple submitted a letter to the SEC’s Crypto Asset Task Force emphasizing the urgent need for consistent, updated regulatory standards that recognize the unique characteristics of cryptocurrencies.
Ripple argues that most fungible tokens — including XRP — should not be automatically categorized as securities, particularly when traded on secondary markets without any relationship to the original issuer or ongoing promises to investors. The company believes tokens lacking enforceable rights or obligations are not investment contracts under U.S. law.
Ripple referenced the pivotal July 2023 decision by Judge Analisa Torres in the SEC vs. Ripple lawsuit. The ruling found that while certain institutional sales of XRP did fall under securities laws, XRP traded on secondary markets did not. Ripple said any new regulations must reflect this legal nuance and move away from overly broad interpretations.
Alderoty: Congress Must Take the Lead
Stuart Alderoty, Ripple’s Chief Legal Officer, criticized the SEC for overstepping its authority and attempting to regulate the crypto space beyond its mandate. He insisted that crafting laws is the responsibility of Congress, not federal agencies.
“Regulatory clarity must come from lawmakers, not regulators overstepping their authority,” said Alderoty.
To help address the regulatory gray areas, Ripple introduced a “maturity test” — a framework intended to evaluate whether a token has evolved beyond being an investment contract and should instead be treated as a standalone asset. The test would examine factors such as the token’s market volume, the age of its underlying network, and the level of decentralization.
Ripple also warned against mischaracterizing all token sales as securities offerings, especially when no promises are made by issuers. The company backed the idea of a good-faith “safe harbor” to foster innovation, but stressed that this does not equate to labeling all tokens as securities.
Legal Clarity Critical for ETF Aspirations
Ripple’s motivation for pushing regulators may also be tied to future financial products, notably the possible launch of an XRP-based exchange-traded fund (ETF). Although no formal request has been filed, analysts believe Ripple’s regulatory advocacy could pave the way for such a product — provided the SEC clarifies the legal status of XRP.
The legal uncertainty surrounding XRP began in December 2020, when the SEC filed a lawsuit against Ripple alleging unregistered securities sales. While Ripple notched a partial legal victory in 2023, the broader legal status of XRP remains unresolved, leaving the door open for ongoing litigation and continued debate.
By pushing for modernized legislation and clearer definitions, Ripple hopes to establish a fairer regulatory environment that supports innovation while still protecting investors.
Regulatory ambiguity surrounding XRP
The legal identity of XRP has been a gray area for years — and that uncertainty continues to ripple across the cryptocurrency market. Since the U.S. Securities and Exchange Commission (SEC) filed its lawsuit against Ripple Labs in December 2020, investors, developers, and exchanges have been left guessing whether XRP should be treated as a security or something else entirely. The result? Regulatory limbo, market hesitation, and a major obstacle to broader crypto adoption in the U.S.
At the heart of the issue is how the SEC interprets the Howey Test — a decades-old legal standard used to determine whether an asset qualifies as an “investment contract” and thus a security under U.S. law. The SEC’s stance has been that Ripple’s XRP sales to institutional investors were unregistered securities offerings. But the July 2023 ruling by Judge Analisa Torres introduced a critical nuance: while some XRP sales to institutions were deemed securities, XRP traded on secondary markets, such as crypto exchanges, were not.
This distinction is vital for XRP holders and the entire crypto sector. It suggests that a token’s classification could depend on the context of its sale — not merely its existence. That opens the door to a more sophisticated framework, one that could separate a token’s utility from its investment characteristics. But until regulators codify such a framework, XRP remains stuck in a legal gray zone.
Without official clarity, exchanges remain cautious. Some U.S.-based trading platforms temporarily delisted XRP following the SEC’s lawsuit, and institutional interest cooled significantly. While the partial legal win in 2023 reignited some optimism, the lack of definitive classification from the SEC continues to cast a shadow over XRP’s full market potential.
For investors, this ambiguity translates into higher risk. Not knowing whether XRP is a security or a commodity affects everything from portfolio compliance to tax reporting. For developers, the uncertainty stifles innovation, as launching new products or integrating XRP into financial apps could trigger regulatory scrutiny. And for Ripple itself, the ongoing legal fog hampers its ability to expand partnerships with banks and financial institutions that require regulatory certainty before onboarding new digital assets.
- Market volatility: XRP has seen price swings tied directly to litigation news, highlighting the market’s sensitivity to regulatory developments.
- Investor hesitation: Institutional investors often avoid assets under legal scrutiny, limiting capital inflow into XRP-related projects.
- Innovation bottleneck: Developers and fintech platforms are less likely to build on XRP Ledger without a clear regulatory green light.
In short, the ambiguity surrounding XRP is more than a legal technicality — it’s a roadblock to progress. Until the SEC or Congress provides a clear and modernized classification framework, XRP will continue to operate in a regulatory twilight zone, with its full potential as a global liquidity solution still out of reach.
Ripple’s appeal to the SEC
Ripple is not staying silent in the face of regulatory fog. In fact, it’s doing quite the opposite — turning up the volume and taking its fight directly to the doors of the U.S. Securities and Exchange Commission. The company has mounted a comprehensive appeal urging the SEC to abandon its rigid reliance on outdated legal interpretations and instead embrace a future-forward approach that reflects the realities of blockchain innovation. At the center of Ripple’s argument is a call for clarity, fairness, and legal frameworks that actually make sense in the 21st century.
In a formal submission to the SEC’s Crypto Asset Task Force, Ripple laid out its position in response to Commissioner Hester Peirce’s “New Paradigm” proposal, which acknowledged the limitations of current securities laws when applied to digital assets. Ripple’s letter didn’t mince words — it emphasized that tokens like XRP, which are used across decentralized networks and traded independently of their original issuers, shouldn’t be lumped in with traditional securities like stocks or bonds.
Ripple’s Chief Legal Officer, Stuart Alderoty, has been particularly vocal, criticizing the SEC’s approach as overly aggressive and legally flimsy. “The SEC is trying to fit a square peg into a round hole,” Alderoty said in a recent interview. “Crypto isn’t going away, and it’s time our regulators stop pretending it’s the same as legacy finance.”
One of Ripple’s most compelling contributions to the regulatory debate is its proposal of a “maturity test” — a framework designed to determine whether a digital asset has evolved beyond being an investment contract. This test would assess several key factors:
- Network Age: How long has the underlying blockchain been operational? Mature networks with years of uptime and proven resilience may warrant different treatment than new, speculative launches.
- Trading Volume and Liquidity: Is the asset actively traded on secondary markets, independent of the issuer? High-volume, decentralized trading implies a utility beyond investment speculation.
- Issuer Involvement: Does the original issuer continue to play a central role in promoting or managing the asset? If not, the token may no longer represent an investment contract.
- Decentralization Metrics: How distributed is the control of the network? Decentralized consensus mechanisms and community governance reduce the likelihood of centralized issuer promises.
Ripple argues that applying this test would help regulators distinguish between tokens that function as genuine securities and those that serve as utilities or mediums of exchange. This would not only bring much-needed clarity to the market but also promote innovation by removing the fear of retroactive enforcement actions.
In tandem with the maturity test, Ripple is also advocating for a safe harbor rule — a grace period during which blockchain projects can develop and grow without the immediate threat of SEC lawsuits. This concept, originally proposed by Commissioner Peirce, has gained traction in the industry as a way to balance investor protection with technological progress. Ripple supports a version of the safe harbor that rewards good-faith efforts to decentralize and comply with evolving standards, rather than punishing innovation before the rules are even clear.
By taking a proactive stance and offering constructive solutions, Ripple is positioning itself not just as a company fighting a lawsuit, but as a leader in shaping the future of crypto regulation. The company’s advocacy is resonating with a growing segment of lawmakers, legal scholars, and industry leaders who agree that the current patchwork of enforcement actions and ambiguous guidance is untenable.
Ultimately, Ripple’s appeal to the SEC is a strategic and calculated move — one that aligns with its long-term vision of XRP becoming a bridge currency in global finance. But for that vision to materialize, the rules of the game need to be rewritten. And Ripple is making it clear: it’s ready to help draft the new playbook.
Implications for the broader crypto market
The Ripple vs. SEC saga isn’t just about XRP — it’s a high-stakes regulatory showdown that could set the tone for the entire digital asset industry in the United States and beyond. The outcome of Ripple’s push for classification clarity has far-reaching implications that extend deep into the crypto economy, influencing everything from token launches and DeFi innovation to investor sentiment and institutional adoption.
At the core of the debate is a fundamental question: What exactly is a crypto asset? Is it a security? A commodity? A currency? Or something entirely new that doesn’t fit neatly into existing legal boxes? Ripple’s battle is forcing regulators, lawmakers, and the crypto community to confront this question head-on — and the answers will shape the future of blockchain innovation.
For startups and developers building in the Web3 space, the classification of digital assets could mean the difference between thriving or folding under the weight of legal uncertainty. Without clear guidance, launching a new token can feel like stepping into a legal minefield. Ripple’s advocacy for a “maturity test” and safe harbor provisions offers a potential blueprint that could unlock a more predictable and supportive environment for innovators.
- Token Launch Strategy: If Ripple’s proposed framework is adopted, projects could design their tokenomics and governance models around a structured path toward decentralization — knowing that regulatory treatment will evolve with their progress.
- DeFi and DApps: Decentralized finance platforms and blockchain-based applications often rely on tokens to function. Clear classification rules would allow these platforms to integrate assets like XRP without fearing retroactive enforcement.
- Cross-border Payments: XRP’s utility as a bridge currency for cross-border settlements hinges on its legal status. A favorable outcome for Ripple could solidify XRP’s role in international remittance networks, enhancing liquidity and reducing transaction costs globally.
Institutional players are also watching closely. The lack of regulatory clarity has kept many traditional financial institutions on the sidelines, unwilling to touch assets that might later be deemed securities. If XRP — a top-10 cryptocurrency by market cap — receives an official green light, it could open the floodgates for broader institutional participation across the digital asset ecosystem.
Furthermore, the conversation around ETFs (exchange-traded funds) adds another layer. The approval of Bitcoin and Ethereum ETFs has already brought a wave of legitimacy and new capital into the space. If XRP’s legal status is clarified, it could become the next candidate for ETF consideration — a move that would dramatically increase retail and institutional access, driving both liquidity and demand.
But perhaps most importantly, Ripple’s legal and regulatory advocacy is sparking a broader shift in how crypto is viewed by policymakers. Rather than treating digital assets as rogue financial instruments, there’s growing recognition that crypto represents a new asset class deserving of tailored regulation. This evolution in perspective could lead to:
- Crypto-specific legislation: Congress may ultimately step in to create dedicated regulatory paths for digital assets, distinguishing between securities, commodities, and utility tokens.
- Global regulatory harmonization: As the U.S. refines its crypto policy, other countries may follow suit, leading to more consistent global standards that reduce compliance friction for international projects.
- Market stability and growth: With clear rules and reduced legal risk, the crypto market could become less volatile and more attractive to long-term investors, driving sustainable growth.
In essence, Ripple’s clash with the SEC is about more than one token — it’s about setting the precedent that will govern the next decade of digital finance. Whether you’re a retail investor, a startup founder, or a hedge fund manager, the outcome of this debate could directly influence your crypto strategy. And as Ripple continues to challenge the status quo, the entire industry is watching — and perhaps, quietly rooting for change.
Calls for clearer cryptocurrency guidelines
As Ripple continues to challenge the regulatory status quo, the call for clear and consistent cryptocurrency guidelines is growing louder — not just from blockchain companies, but from investors, developers, and even members of Congress. The crypto space has evolved far beyond its early speculative roots, yet the rules governing it remain stuck in an analog era. This mismatch is creating confusion, stifling innovation, and delaying the mainstream integration of digital assets like XRP into the global financial system.
One of the biggest pain points is the SEC’s continued reliance on the Howey Test — a legal doctrine from 1946 — to define whether a digital asset is a security. While the test has been useful in traditional finance, applying it wholesale to crypto tokens has created a regulatory black hole. Ripple, along with other industry leaders, is urging the SEC to adopt a more nuanced, crypto-native framework that reflects how these digital assets actually function in today’s decentralized economy.
To bridge this regulatory gap, Ripple’s proposed “maturity test” and advocacy for a safe harbor are just the beginning. The broader industry consensus is coalescing around a few key principles that any future regulatory framework should include:
- Contextual Classification: Tokens should be evaluated based on how they are used and traded, not just how they were originally issued. A dynamic classification system could differentiate between tokens used as investment vehicles and those serving as utilities or payment methods.
- Transparency and Disclosure: Projects should be encouraged to provide clear, standardized disclosures about tokenomics, governance, and risks — similar to what public companies disclose to investors, but tailored to the unique structure of blockchain ecosystems.
- Regulatory Coordination: Agencies like the SEC, CFTC, and IRS must work together to avoid overlapping or contradictory rules that leave crypto businesses in a compliance no-man’s-land. A unified regulatory roadmap would offer much-needed predictability.
- Innovation-friendly Policies: Guidelines should be designed to support innovation while protecting consumers — not to punish startups with retroactive enforcement or vague expectations. Sandboxes and pilot programs could help test new models before full-scale regulation is imposed.
Lawmakers are beginning to take notice. Bipartisan efforts in Congress — such as the Financial Innovation and Technology for the 21st Century Act — aim to provide a legislative framework that distinguishes between digital commodities and securities. While these bills are still in early stages, they represent a shift toward recognizing crypto as a legitimate and permanent part of the financial landscape.
For XRP holders and the broader Ripple ecosystem, the establishment of clear guidelines could be a game-changer. Regulatory clarity would not only reduce legal risk but also unlock new opportunities in institutional finance, payment integration, and cross-border settlements. Imagine a world where XRP can be seamlessly integrated into banking apps, DeFi platforms, and enterprise payment rails — without the looming threat of enforcement action. That’s the future Ripple is advocating for, and it hinges on the creation of smart, forward-thinking regulation.
The stakes are high. With the global digital asset market expected to surpass trillion in the next few years, the U.S. risks falling behind if it doesn’t modernize its regulatory approach. Other jurisdictions — from the EU with its MiCA framework to countries like Singapore and the UAE — are already rolling out crypto-specific regulations designed to attract investment and foster innovation. If the U.S. wants to remain a leader in financial technology, it must catch up — and Ripple is making sure that message is heard loud and clear.
Clarity isn’t just about compliance — it’s about confidence. It’s about giving developers the green light to build, giving investors the assurance to allocate capital, and giving enterprises the stability to integrate blockchain into their operations. As Ripple continues to push for regulatory reform, the call for crystal-clear crypto guidelines is no longer a niche demand — it’s a foundational necessity for the next wave of digital finance.