Ripple has sent an open letter urging the SEC to follow the laws already set by Congress. The letter responds to the Crypto Task Force’s RFI dated February 21, 2025.
Ripple opens by quoting Bob Dylan, stating, “There’s too much confusion. I can’t get no relief.” They argue that the SEC’s previous crypto guidance has been overly complicated and unclear.
Ripple asserts that this confusion runs counter to the Task Force’s goal of providing clear and predictable criteria for asset classification.
Criticism of the SEC Approach
Ripple emphasizes that the SEC’s authority is strictly limited by the laws passed by Congress. They claim that most digital assets do not qualify as securities under current statutes.
Ripple believes that the SEC should provide simple market guidance instead of creating new, complex tests. They argue that any regulatory gaps should be filled by Congress, not by an agency expanding its authority.
Ripple calls for a return to first principles in developing crypto policy. They insist that clear and predictable rules must be the norm for the industry.
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Misapplication of the Howey Test
A significant portion of the letter criticizes the SEC’s misuse of the 1946 Howey test. Ripple contends that the previous administration distorted the test by making it too flexible and complex.
They argue that the Howey test should remain true to its original meaning and intent. According to Ripple, an investment contract must involve an enforceable agreement where one party invests money in expectation of profits from another party’s efforts.
Ripple warns that token sales without promised yields or future profit rights should not be classified as securities. They cite the dramatic drop in XRP’s price following the SEC lawsuit as an example of market disruption caused by such misinterpretations.
Yield-Generating Arrangements
Ripple argues that yield generated algorithmically by public protocols should not be deemed securities. They maintain that such returns differ fundamentally from profits earned through third-party managerial efforts.
The letter stresses that digital assets earning yields through network protocols do not meet the traditional criteria of an investment contract. Ripple asserts that these arrangements lack a defined counterparty responsible for generating profit.
This view, they argue, supports both market innovation and the proper classification of digital assets. Ripple believes that applying securities laws to such cases would harm the crypto industry.
Support for Regulatory Sandboxes
Ripple voiced support for Commissioner Peirce’s safe harbour proposals for digital asset issuers. They suggest that safe harbour measures may be useful, particularly for initial coin offerings that require temporary regulatory relief.
Ripple insists that such measures should only be implemented once Congress enacts clear market structure legislation. They also support the use of regulatory sandboxes to help companies test new products in a controlled environment.
Sandboxes can provide the flexibility needed to foster innovation while still ensuring investor protection. Ripple sees these initiatives as a way to balance progress with regulatory clarity.
Industry Dialogue and Future Directions
Ripple’s letter is part of an ongoing dialogue between the crypto industry and regulatory authorities. The company encourages the SEC to provide clear and principled market guidance based on existing statutes.They argue that any necessary changes should be legislated by Congress rather than imposed by the agency.
Ripple calls for predictable and fair regulations that protect investors without stifling innovation.
They stress that overreach by the SEC could hinder the growth and global competitiveness of the digital asset market. Ripple remains open to continued discussions to resolve regulatory uncertainties.
