Ripple Urges SEC to Clarify Crypto Regulation, Citing Legal Boundaries

Ripple has formally responded to the U.S. Securities and Exchange Commission (SEC) following Commissioner Hester Peirce’s request for public input on digital asset classification. The request, titled “There must be some way out of here,” aimed to gather constructive feedback to develop clearer standards for cryptocurrency regulation. Ripple’s response emphasized the need for the SEC’s Crypto task Force to base its actions on existing law, avoid overly complex interpretations, and promote regulatory clarity.

In its response, Ripple outlined its recommendations for crypto regulation, focusing on the need for clarity and consistency in applying U.S. securities laws to digital assets. The company asserted that the SEC does not have authority over most digital assets under current statutes. It emphasized that the SEC can only regulate securities as defined in the Securities Act of 1933 and the Exchange Act of 1934. Ripple warned that any attempt to expand that authority without Congressional action would exceed the agency’s legal bounds.

Ripple also challenged the previous administration’s approach to applying the Howey test. The company noted that speculative trading and token value discussions were incorrectly used to define investment contracts. Ripple urged the SEC to avoid misusing legal tests to claim jurisdiction over transactions that do not involve securities. This move comes just days after the SEC officially dropped its long-standing lawsuit against Ripple, marking a major turning point for the crypto industry.

In the filing, Ripple called for the use of traditional legal terms, such as “investment contract,” when classifying digital assets. The company argued that a valid investment contract requires a clear, enforceable agreement between parties, including an expectation of profit generated through the actions of a counterparty. Ripple warned against expanding the definition of securities to include digital assets without a contractual promise, stating that simply selling a token should not be treated as a capital raise or investment contract. The company asked the regulator to focus on straightforward applications of existing legal standards.

Ripple also addressed staking mechanisms on decentralized networks in its letter. It argued that these systems do not meet the definition of a securities offering. The crypto company emphasized that staking rewards are often generated by protocols through algorithmic rules, not through the managerial efforts of a third party. Ripple asked the SEC to confirm that such yield-generating activities do not require securities registration, stating that these arrangements lack an identifiable issuer or counterparty making investment promises. As a result, they should fall outside the SEC’s regulatory scope.

Ripple concluded that clear, limited, and legally grounded guidance would support market participants. The end of the XRP vs SEC lawsuit has sparked renewed bullish momentum, with analysts predicting the altcoin to rally to new highs.