Ripple Seeks Legal Clarity on When XRP and Similar Tokens Stop Being Securities

Highlights:

• Ripple proposes clear rules to decide when a crypto token no longer counts as part of an investment contract.
• The company suggests using network maturity to replace unclear standards in digital asset classification.
• Ripple has urged the SEC to follow current law and not expand its power without action from Congress.

Ripple submitted a letter to the SEC’s Crypto Task Force on May 27. The letter was written as a response to Commissioner Hester Peirce’s comments on when a digital asset is considered different from its investment contract. Stuart Alderoty, Ripple’s chief legal officer, published the letter to explain the legal basis. The company pointed out that when crypto tokens are traded in secondary markets, the issuer may not owe any legal duties to the holder.

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Today, @Ripple submitted an additional letter to the SEC’s Crypto Task Force addressing a key question from Commissioner Peirce’s “New Paradigm” speech: When does a digital asset separate from an investment contract?

We appreciate the continued engagement with the Task Force.…

— Stuart Alderoty (@s_alderoty) May 27, 2025

Ripple cited a 2022 legal paper that agrees with this interpretation. The document pointed out that fungible digital assets used on exchanges should not be categorized as securities. In addition, Ripple noted the outcome of the Ripple Labs case vs. SEC. According to the ruling, XRP was not identified as a security, but it was found that early sales of XRP by some institutions could be seen as investment contracts.

According to Ripple, a digital asset should only remain part of an investment contract if two conditions are met. First, the issuer must have made material promises that are still unfulfilled. Second, the current holder must have enforceable rights linked to those promises. Without these conditions, Ripple stated that the asset should no longer be treated as part of a securities offering.

Network Maturity Test Offers Alternative to Vague Standards

Ripple also suggested in the letter a new method to determine if a digital asset is separate from its original investment arrangement. The test clearly explains how to classify a token in terms of its legal status. Ripple said that laws should not use terms that are not clearly defined, like “sufficient decentralization.” Instead, it suggested making decisions based on objective things like the maturity of the network, experience with public trading, and the lack of a single controlling party.

Ripple put forward a framework called “network maturity” that bases measurements on certain specifics. The company stated that if a token meets specific standards, it should no longer fall under securities rules. It suggested a minimum market capitalization of $1 billion and at least ten years of network operation. Ripple emphasized that mature networks already trade with enough market data and public transparency.

The proposed test aims to reduce uncertainty for secondary market participants. Ripple said this approach would prevent digital assets from staying under outdated investment classifications. It also noted that new investment contracts could still form if needed. However, Ripple stressed that these should be judged by current facts and not by the asset’s origin.

Ripple emphasized that clear policies would give responsible builders more security. Besides, the SEC could continue using its powers when it comes to fraud or deceptive offers. Ripple pointed out that laws must not change whenever the meaning of a term is uncertain.

Ripple Seeks Legal Clarity in Ongoing SEC Dispute

Ripple’s legal battle with the SEC continues. On May 15, Judge Analisa Torres rejected a $125 million settlement proposal due to procedural concerns. Both sides are expected to refile soon as the case nears its final stage. The dispute remains active despite earlier progress in court.

Ripple maintains that only Congress has the power to create new laws for crypto assets. It urged the SEC to stay within the boundaries of existing law. The company also backed a narrow safe harbor to support projects acting in good faith. Ripple’s letter called for rules that provide clarity without limiting innovation.

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