Ripple Sends a New Letter to the SEC's Crypto Task Force Addressing the Definition of a Digital Asset

Ripple's Chief Legal Officer, Stuart Alderoty, took to X (formerly Twitter) today to share that Ripple has sent an additional letter to the U.S. SEC's Crypto Task Force. The letter responds to a recent speech by SEC Commissioner Hester Peirce titled “New Paradigm,” where she raised an important question: When does a cryptocurrency stop being part of an investment contract and become just a digital asset?

In a recent post on X, Ripple’s Chief Legal Officer, Stuart Alderoty, shared that the company has sent an additional letter to the U.S. SEC’s Crypto Task Force. The letter is a response to a recent speech by SEC Commissioner Hester Peirce, titled "New Paradigm," where she raised an important question: When does a cryptocurrency stop being part of an investment contract and become just a digital asset?

In their letter, Ripple thanked the SEC team for their meeting on May 20, 2025, and offered further thoughts on the issue.

"Most cryptocurrencies traded today are not securities," argued Ripple. They also cited legal analysis by Lewis Cohen and others, which says that when crypto tokens are sold in secondary markets — like exchanges — they usually don't meet the legal definition of a security.

"This analysis aligns with Judge Torres's ruling that XRP is not a security when sold on open cryptocurrency exchanges in the secondary market."

The company went on to discuss last year's court ruling by Judge Torres in the SEC's lawsuit against Ripple. The judge decided that while some of Ripple's early XRP sales to big investors counted as investment contracts, the XRP token itself isn't a security when sold on secondary markets.

"We agree with the SEC that bad actors are a concern, but Congress is the one who needs to change the laws to deal with that," stated Ripple.

They also warned against the SEC making vague rules about a token being "fully functional" or "sufficiently decentralized." Such rules, they argued, would cause confusion in the crypto market.

Instead, Ripple suggested a clearer legal framework. For example, if a crypto token was once sold as part of an investment contract, it should be considered separate from that contract when:

- It's sold on a public exchange, not directly from the token issuer.

- The token's price is set by market forces of supply and demand.

- It can be freely bought, sold, and used without any restrictions.

Furthermore, they proposed a safe harbor rule to protect honest crypto projects that are still developing, helping them avoid legal risks while following clear guidelines.

"Finally, we recommend using the maturity of a crypto network — how big and established it is — rather than vague ideas like decentralization, to decide whether it should still be regulated as a security," concluded Ripple.

They suggested that tokens on open, permissionless networks with a large market value, operational for several years, and where no one party has control, should no longer fall under securities laws.

This letter from Ripple provides valuable insight into the ongoing dialogue between the crypto industry and the SEC as they navigate the complex landscape of digital assets and securities regulations. The company's recommendations offer a practical and nuanced approach to integrating cryptocurrencies into the existing legal framework.