Ripple Urges SEC to Separate Crypto Assets From Securities Transactions

Ripple has called on the U.S. Securities and Exchange Commission to establish clearer boundaries between digital assets and securities transactions. The company said current regulatory approaches fail to distinguish between a crypto asset and the contractual obligations under which it was originally issued. Ripple emphasized that future rules should focus on enforceable legal rights rather than subjective or evolving criteria.

The company criticized the use of decentralization as a legal standard for determining whether a crypto asset qualifies as a security. Ripple said decentralization is not a fixed state and can vary depending on governance, code development, and network participation. The firm warned that this approach could either allow risky assets to escape oversight or trap mature assets under securities laws indefinitely.

Ripple also rejected the idea that expecting profit from the efforts of others is the sole determinant for securities classification. The company argued that securities laws should regulate enforceable promises, not market expectations. Once a company's obligations have been fulfilled, the digital asset should no longer be subject to securities regulation.

Why Is Ripple Pushing for Regulatory Clarity?

Ripple has long argued that the current regulatory framework creates confusion for market participants. The company's position aligns with broader industry efforts to establish a stable legal foundation for crypto assets. Ripple's letter to the SEC highlights the need for a rules-based system that reflects the evolving nature of digital assets.

The firm emphasized the importance of privity—direct contractual relationships between buyers and issuers—as a basis for applying securities rules. Ripple said secondary market trading should not be subject to the same rules once transactions occur without a direct relationship between the parties.

How Does This Fit Into the Larger Regulatory Picture?

Ripple's arguments align with ongoing legislative efforts in Congress. The Digital Asset Market Clarity Act, currently under consideration in the Senate, seeks to define digital commodities and clarify the roles of the SEC and the Commodity Futures Trading Commission. The bill aims to provide a federal framework for crypto regulation, addressing issues such as trading platforms, custody services, and stablecoin oversight.

Industry observers have noted that clear regulatory guidance could attract institutional investors. Ripple's position reinforces calls for a regulatory environment that supports innovation while protecting investors.

What Are Analysts Watching for Next?

Market participants are closely watching how the SEC and Congress respond to Ripple's proposals. A decision on the CLARITY Act and related regulatory actions could shape the future of crypto markets. Ripple's stance has drawn attention from both industry players and policymakers, who are seeking a balanced approach to regulation.

Analysts at Galaxy Research said that defining regulatory jurisdictions and protecting developers could be a major catalyst for crypto adoption. The outcome of these discussions will likely influence the broader market structure and investor confidence in digital assets.

Ripple's efforts reflect a broader trend of companies seeking regulatory certainty in the crypto space. As the industry continues to evolve, the need for a consistent and predictable legal framework has become increasingly apparent.