Ripple’s Legal Chief Demands SEC Clear Rules to Fast-Track XRP ETFs
Debashree Patra28 May 20253 min read
Ripple’s Chief Legal Officer, Stuart Alderoty, has asked the SEC to give clear rules on how crypto tokens should be treated. In a letter to the SEC’s Crypto Task Force, Alderoty said most crypto tokens traded in the secondary market should not be treated as securities. This retaliation is seen as Ripple’s efforts to launch XRP ETFs this year, as without legal clarity, it will be further delayed, and it may give other assets an advantage over XRP. Right now, the market is ready to adopt XRP, and ETFs will boost its reach like they did for Bitcoin.
XRP Ruling Supports the Case
Referencing Judge Torres’s ruling in the SEC v. Ripple case, where the court said XRP sales on exchanges are not securities. He also mentioned a legal paper by Lewis Cohen, which says a token only counts as a security if there’s a clear relationship between the buyer and seller. This doesn’t happen when people trade tokens on exchanges.
New Rules Should Come From Congress
According to Alderoty, the SEC should not make new rules on its own. He believes Congress should be the one to create laws for the crypto market. He said that guidance based on existing laws would help clear up confusion for everyone. While acknowledging that crypto regulation still has gaps, Alderoty firmly stated that the SEC cannot create new rules on its own. Instead, he called on Congress to establish a legal framework tailored for the digital asset space. According to him, regulatory clarity must come from lawmakers, not regulators overstepping their authority.
Possible Scenario for Security Status
Meanwhile, Ripple has suggested using a ‘network maturity’ test to help decide if a crypto token should still be treated like a security. This test looks at things like how big the project has become, how long it has been running, and how control is spread out. Ripple says a token should only be considered a security if two things happen at the same time: if the original promises from the issuer haven’t been fulfilled, and if the current holder has legal rights to those promises. If not, the token should be treated separately from the original investment contract. This move is seen as part of Ripple’s effort to clear the legal path for a possible future ETF.
The Push for Fairer Crypto Rules Grows
This request from Ripple follows similar calls from the Blockchain Association and others who want the SEC to stop applying traditional finance rules to crypto. With big names like BlackRock also talking to the SEC’s Crypto Task Force, the push for better rules is only getting stronger.
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FAQs
- Ripple argues the SEC is overstepping by attempting to create new crypto rules unilaterally, asserting that such regulatory clarity should come from Congress.
