Ripple Urges SEC to Tie Crypto Regulation to Legal Rights, Not Speculation

Ripple has urged the U.S. Securities and Exchange Commission (SEC) to shift its regulatory approach for crypto assets toward enforceable legal rights, rather than factors like speculation or market behavior. The company submitted a letter to the SEC's Crypto Task Force on Jan. 9, advocating for a framework that limits securities oversight to enforceable promises tied to transactions. Ripple argues that the SEC's authority should align with the lifespan of these obligations, ceasing when the obligations are fulfilled or end.

The letter, signed by Ripple's legal team, emphasizes the risks of conflating transactions with the underlying assets, warning that current SEC approaches could expand the agency's jurisdiction indefinitely. Ripple criticizes reliance on decentralization, trading behavior, or ongoing development as substitutes for legal definitions, calling for clear legal boundaries. The company asserts that speculation exists across all markets and should not be the basis for determining if an asset is a security.

In its letter, Ripple stresses that the defining factor for a security should be the holder's legal rights, not market expectations or price movement. The firm explains that speculation is a feature of all markets, and market participation alone does not create a securities relationship.

Why Did Ripple Submit This Letter to the SEC?

Ripple's letter to the SEC is part of a broader effort to define a clearer regulatory framework for crypto assets. The company argues that the SEC should limit its oversight to situations where there are enforceable legal obligations, such as dividend rights or ownership interests. Ripple warns that failing to distinguish between transactions and assets could create an unbounded regulatory framework, allowing the SEC to extend its reach indefinitely.

The company highlights the importance of a rights-based approach, where legal obligations, rather than market activity, determine whether a digital asset qualifies as a security. Ripple's legal team argues that this approach would provide greater clarity for market participants and reduce regulatory uncertainty.

How Does Ripple View the Role of Market Speculation in Crypto Regulation?

Ripple's position rejects the idea that market speculation alone should trigger securities laws. The company states that speculation is inherent in all financial markets and should not be the basis for classifying an asset as a security. Ripple argues that the SEC should focus on whether a holder has enforceable legal claims, such as rights to dividends or ownership interests, rather than on whether the holder expects a price increase.

The firm compares crypto markets to commodities and consumer goods, which trade actively without triggering securities laws. Ripple supports fit-for-purpose disclosures in cases where direct promises or retained control exist, while maintaining that fraud and manipulation can be addressed under existing enforcement tools.

What Are the Potential Implications for the SEC's Current Framework?

Ripple's letter highlights the risk that current SEC approaches could lead to an indefinite expansion of the agency's jurisdiction over crypto assets. By failing to draw a clear line between transactions and assets, the SEC could end up regulating a broader range of digital assets than intended. Ripple argues that this would create regulatory ambiguity and potentially hinder innovation in the crypto space.

The company's submission is part of a growing effort to bring clarity to the regulatory landscape for digital assets. With ongoing discussions about the Digital Asset Market Clarity Act and other legislative proposals, Ripple's letter underscores the need for a framework that balances investor protection with market innovation.

What Do Analysts See as the Next Steps?

Analysts are watching how the SEC responds to Ripple's call for a rights-based framework. The letter aligns with broader industry efforts to define a more precise regulatory model that distinguishes between different types of digital assets. With two Senate committees preparing markup hearings for the Digital Asset Market Clarity Act, the outcome of these discussions could shape the future of crypto regulation in the U.S.

The SEC's response to Ripple's submission, and its broader approach to defining the regulatory boundaries for crypto assets, will be critical in determining the long-term direction of the industry. Ripple's letter reinforces the industry's push for a legal framework that is both clear and adaptable to technological innovation.