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Ripple’s Chief Legal Officer, Stuart Alderoty, has expressed critical concerns regarding the U.S. Securities and Exchange Commission’s (SEC) understanding of “investment contracts” and its application to cryptocurrencies. Alderoty, referring to Lewis Cohen’s article “The Ineluctable Modality of Securities Law,” emphasized that for an investment contract to exist, a direct and contractual legal relationship must be present between the buyer and seller. He pointed out that such a connection often doesn’t exist in secondary market crypto transactions, urging the SEC to clearly delineate boundaries to protect innovative ventures and conclude ongoing legal disputes.
Clarification Needed on Securities Law Application
A critical focus of Alderoty’s letter is the uncertainty arising from the “blanket” application of securities laws to cryptocurrencies. He highlighted the recent decision by U.S. District Judge Analisa Torres, who ruled that XRP’s secondary market sales do not qualify as securities, emphasizing that initial offerings to institutional investors should not be equated with exchange trading activities. Alderoty argued that the SEC should abandon its one-size-fits-all approach of treating every cryptocurrency as an inherent investment contract during its current cases.
The arguments in the letter advocate for variations in law application depending on the evolving nature of the investor-issuer relationship. Alderoty cautioned against stifling innovation under the guise of regulating the crypto ecosystem. Addressed to the Crypto Task Force within the SEC, his letter warned that failing to draw clear distinctions might cause the U.S. to lose ground in global competitiveness.
Global Implications of Ripple-SEC Legal Battle
The Ripple 
$3-SEC lawsuit, ongoing for nearly five years, serves as a benchmark for the crypto market. Conclusions on the XRP token’s legal status could set precedents affecting projects from Ethereum 
$4,688 to Solana 
$201. Many market participants believe the U.S. court rulings could reshape regulatory frameworks from Australia to the European Union. Therefore, Alderoty’s recent push has garnered attention not just from legal experts but also from investors.
Analysts suggest that in the coming months, the SEC may shift towards principle-based, technology-neutral regulations rather than rigid frameworks. If the SEC distinctly separates the concepts of investment contracts and cryptocurrencies, institutional capital’s risk perception may lessen, slightly alleviating regulatory fears in the sector. Conversely, a lack of clarity might accelerate the migration of U.S.-based projects abroad, further weakening the domestic ecosystem.
