Ripple has publicly supported a new proposal from the US Securities and Exchange Commission (SEC) aimed at clarifying the regulatory framework for cryptocurrencies. Chief Legal Officer Stuart Alderoty revealed that the blockchain payments firm spent more than $150 million on legal fees during its long-running dispute with the regulator over the status of XRP.
SEC’s Regulation Crypto Assets: New Framework, Ripple’s Response
The SEC introduced Regulation Crypto Assets on August 18, outlining a specialized approach for investment contracts involving digital assets. The proposal would allow qualified crypto issuers to offer up to $5 million over four years or up to $75 million within a 12-month period under certain exemptions.
A conditional safe harbor provision features in the draft rule, specifying when an investment contract linked to a digital asset may no longer be considered a security under US law.
Ripple endorsed the SEC’s general approach but has urged the agency to clarify that federal securities laws should focus on the investment arrangement tied to a digital token, not on the token itself. This distinction played a key role in Ripple’s partial courtroom victory, where a federal judge differentiated between institutional XRP sales and some public-exchange trades.
Alderoty stated that regulatory enforcement actions have led to crypto innovation moving overseas, arguing that businesses seeking legal clarity should not be forced into lengthy litigation.
Ripple continues to advocate that companies should not have to spend years and tens of millions fighting for clear rules, as legal disputes have made the US less attractive for crypto innovators.
Alderoty clarified that Ripple’s $150 million legal expenditure is separate from the $125 million civil penalty ordered in the aftermath of the company’s XRP case.
Mini dictionary: Ripple, a US-based blockchain technology company, is best known for its digital payment protocol and the associated cryptocurrency XRP. The firm has been central to legal debates over how cryptocurrencies should be classified under US securities law.
Push for Clarity on XRP and Investment Contract Rules
Ripple’s main contention is the application of the Howey test, a legal standard used to determine whether a given arrangement constitutes an investment contract subject to securities regulation.
The company maintains that while a cryptocurrency may be initially sold as an investment contract, subsequent secondary market transactions involving the same token should not automatically be considered securities transactions.
The debate over whether secondary-market transactions of digital assets like XRP should fall under securities law remains significant for token holders and other blockchain projects.
Ripple has emphasized that assessing decentralization alone does not suffice as a clear standard for ending securities-related obligations. Instead, the firm argues for criteria based on tangible promises and responsibilities established during the original offering.
The SEC’s ongoing safe-harbor initiative seeks to establish predictable rules for fundraising in the digital asset space, while still ensuring regulatory oversight. Proposed exemptions for fundraising do not eliminate all regulatory requirements, nor do they automatically free all XRP trades from oversight.
Regulatory Developments and Industry Impact
Ripple’s support for the SEC’s crypto regulation proposal arrives in the wake of Congress failing to advance comprehensive cryptocurrency market-structure legislation. The stalling of the CLARITY Act in September left the digital asset sector without much-anticipated statutory guidance.
The SEC’s current rulemaking process may provide an alternative path for regulatory certainty, although the ultimate impact depends on the wording that appears in the final version and the Commission’s authority.
Earlier SEC deliberations involving XRP underscored the significance of clear definitions and regulatory exemptions for digital asset businesses seeking to operate in the US market.
