Key Takeaways
- Ripple backs formal SEC rules over case-by-case crypto enforcement.
- Token status should follow issuer promises, the company argues.
- Requested safeguards address trading access, filings, and buyer eligibility.
SEC Authority and Fundraising Rules
Clearer rules for crypto fundraising and trading were central to Ripple’s Oct. 20 submission to the U.S. Securities and Exchange Commission (SEC). The blockchain payments company argued existing law authorizes the framework despite the stalled CLARITY Act, building on its position separating crypto assets from securities transactions.
Chief Legal Officer Stuart Alderoty and other Ripple attorneys backed adoption with trading safeguards. The company wrote:
“It is the investment contract, not the crypto asset itself, that is the security.”
It favors binding rules over enforcement cases and guidance that agency leadership can more easily reverse.
Under the SEC’s proposed Regulation Crypto Assets framework, certain crypto fundraising transactions would qualify for registration exemptions permitting offerings of up to $5 million over four years or up to $75 million annually. Issuers would provide disclosures and remain subject to antifraud protections. Public comments were due Oct. 20.
Issuer Promises Set Securities Boundaries
An investment contract involves money invested in a common enterprise with expected profits derived from others’ managerial efforts. The rights attached to crypto tokens can instead include access or governance functions, such as voting on project rules, without company ownership. Ripple argues shared hopes for price appreciation alone do not establish a common enterprise.
Conditional protection under the proposed safe harbor would apply after promised essential managerial efforts end. These are activities essential to the venture’s success and expected investor profits. Ripple supports eligibility when promises are fulfilled, abandoned, or terminated, provided issuers make and intend no new such commitments. Antifraud liability continues.
Ordinary product marketing should be distinguished from profit-generating commitments, Ripple argues, extending distinctions in SEC staff guidance on issuer promises. It rejects general decentralization checklists and company associations as substitutes for analyzing promises. However, arrangements directing company revenue toward token-holder returns, including automated buybacks or burns, can create investment contracts, the company contends.
Trading Safeguards Cover Filings and Buyer Access
Form TR would provide a public certification explaining why an investment contract has ended for issuers seeking the safe harbor. Ripple requests protection for good-faith reliance, prospective application of later SEC determinations that conditions were unsatisfied, and no presumption of investment-contract status from failing to file. It also seeks consistent treatment across federal securities laws.
Excluding dealers from relief against state registration requirements could restrict access, widen trading spreads, and push activity offshore, the company warns. Its proposed changes would cover ordinary broker-dealer trading while retaining exclusions for issuers, underwriters, and dealers participating in issuer distributions. State oversight of intermediaries would remain preserved.
Other requests address continued relief when issuer filings become overdue and opposition to income or wealth thresholds for resale buyers. Ripple also seeks confirmation that holding, lending, pledging, collateralizing, or staking alone does not require holder registration or reliance on an exemption, change investment-contract status, or remove relief from state registration and qualification requirements.
