Ripple’s Bold Move: SEC’s Crypto Task Force Gets a Dose of Reality! đŸ’„

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In the bustling corridors of Washington, where the air is thick with ambition and the scent of legal papers, Ripple Labs has unleashed a fresh barrage of legal rhetoric. On the 27th of May, they sent a 4-page memorandum to the US Securities and Exchange Commission’s Crypto Task Force. Chief legal officer Stuart Alderoty took to X, like a modern-day Paul Revere, to announce this filing, which directly responds to Commissioner Hester Peirce’s “New Paradigm” speech from the 19th of May. Ah, the pivotal question posed: “When does a non-security crypto asset that was once part of an investment contract become separated from that contract?” A question as slippery as a greased pig at a county fair! 🐖

Ripple Pushes SEC For Clarity On XRP

In the opening lines of their letter, Ripple graciously thanks the staff for a meeting on the 20th of May, framing their submission as a doctrinal answer to Peirce’s query. They lean heavily on the 2022 academic treatise, The Ineluctable Modality of Securities Law by Lewis Cohen et al., quoting it in full: “[T]here is no current basis in the law relating to ‘investment contracts’ to classify most fungible crypto assets as ‘securities’ when transferred in secondary transactions
” Ripple boldly claims that this paper is “the most accurate reflection of existing law.” Well, if that isn’t a legal mic drop! đŸŽ€

The company proposes a two-pronged litmus test to determine when a token has definitively “severed” from its investment contract. According to Ripple, any later sale of the asset is presumed not to be a securities transaction unless (i) a material promise made to the original purchaser remains outstanding and (ii) the subsequent holder retains enforceable rights arising from that promise. Promises like building a functional blockchain or providing dividends are valid, while “general public statements or puffery” are not. Because who needs vague promises when you can have solid commitments, right? 🙄

Ripple positions its framework as consistent with Judge Analisa Torres’s landmark ruling from July 2023, which declared that XRP itself is not a security, even if certain institutional sales had been investment contracts. By invoking this ruling, Ripple reminds the Commission that secondary-market trading of XRP—especially those blind order-book sales—has already been given the judicial thumbs up as non-securities activity. Talk about a legal safety net! đŸ›Ąïž

While acknowledging the SEC’s concerns about bad actors exploiting legal loopholes, Ripple tells the agency that it’s Congress’s job to close any genuine gaps, not theirs. In the meantime, they endorse a “well-designed safe harbor” but caution that terms like “fully functional” or “sufficiently decentralized” are as slippery as a wet bar of soap. đŸ§Œ

Commissioner Peirce’s own remarks provide the backdrop. In her “New Paradigm” speech, she conceded that “most currently existing crypto assets in the market are not [securities]” and highlighted the difficulty of determining when a non-security crypto asset subject to an investment contract separates from that contract. Peirce even floated the idea of a time-limited safe harbor. Ripple, ever the opportunist, seizes on this momentum, arguing that their bright-line test is superior to “decentralization” metrics and would allow functional networks to circulate tokens “openly, transparently, and permissionlessly” without imposing disclosures that suggest control where none exists. Because who doesn’t love a little transparency? đŸ€·â€â™‚ïž

The submission arrives as the long-running SEC v. Ripple litigation edges toward a final resolution. Earlier this month, the Commission proposed a settlement that would cap Ripple’s institutional-sale liability and lift the remaining injunction on XRP distributions, but the court has yet to approve the deal. The suspense is palpable! 🎭

Market reaction has been as muted as a library on a Sunday afternoon. XRP continues to trade near the $2.30 zone, leaving many to wonder if this is the calm before the storm or just another day in the crypto wild west. đŸ€”

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2025-05-28 21:13