Ripple has submitted an additional letter to the U.S. Securities and Exchange Commission’s Crypto Task Force, calling for clearer guidelines on when a digital asset stops being part of an investment contract.
The letter, shared publicly by Ripple’s (XRP) chief legal officer Stuart Alderoty on May 28, responds to a key question raised by commissioner Hester Peirce in her recent “New Paradigm” speech: At what point does a crypto asset separate from an investment contract and cease to be treated as a security?
Ripple pointed to existing legal analysis, particularly the 2022 paper titled The Ineluctable Modality of Securities Law. The paper argues that most fungible crypto assets traded on secondary markets are not securities, as they do not carry ongoing obligations between buyers and the original issuers.
The company also cited the 2023 ruling in SEC vs. Ripple Labs, where the court found that XRP is not inherently a security, only some early institutional sales qualified as investment contracts.
In its letter, Ripple proposed a clear legal test. It suggests that a digital asset should be presumed separate from the investment contract unless two conditions are met. First, the issuer must have made material promises that remain unfulfilled, and second, the current holder has enforceable rights against the issuer.
This would prevent regulators from targeting assets based solely on their origin and allow more legal certainty for market participants. “A sound safe harbor should operate within, not expand, the existing scope of federal securities law,” the letter emphasized, calling for clarity that protects good-faith actors without shielding bad ones.
Ripple also criticized vague regulatory concepts like “sufficient decentralization,” calling instead for objective criteria like network maturity, public trading history, and a lack of unilateral control. The company maintained that new rules must be grounded in current law, not created through enforcement.
The filing comes as Ripple and the SEC approach the final stages of a years-long legal battle. While a settlement proposal was denied by Judge Analisa Torres on May 15 due to procedural issues, both parties are expected to refile.
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