Ripple Takes Bold Stance on XRP Classification as SEC Review Intensifies
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The crypto world is watching closely as Ripple Labs pushes forward with aggressive legal arguments while facing simultaneous regulatory scrutiny.
Recent developments show the company making strategic moves on multiple fronts, challenging fundamental assumptions about how digital assets should be classified under securities law.
Ripple’s Legal Framework Challenge
Ripple submitted a detailed letter to the SEC’s Crypto Task Force this week, addressing a critical question raised by Commissioner Hester Peirce: when does a digital asset separate from an investment contract?
Today, @Ripple submitted an additional letter to the SEC’s Crypto Task Force addressing a key question from Commissioner Peirce’s “New Paradigm” speech: When does a digital asset separate from an investment contract?
We appreciate the continued engagement with the Task Force.…
— Stuart Alderoty (@s_alderoty) May 27, 2025
The company’s response centers on a two-pronged legal test that could reshape crypto regulation.
The proposed framework suggests digital assets should be presumed separate from investment contracts unless specific conditions exist.
First, the original issuer must have outstanding material promises. Second, current token holders must possess enforceable legal rights against that issuer. This approach aims to prevent regulators from targeting assets based solely on their creation circumstances.
Ripple’s argument draws heavily from legal scholar Lewis Cohen’s 2022 analysis, which concluded that fungible crypto assets traded in secondary markets typically lack the necessary legal relationships that define securities.
The company emphasizes that once tokens enter secondary trading, the fundamental investment contract dynamics change significantly.
Ripple Makes Technical Architecture Clarifications
Ripple Chief Technology Officer David Schwartz addressed persistent misconceptions about XRP’s underlying structure.
He clarified that XRP operates without a central issuer, with all tokens distributed simultaneously when the XRP Ledger launched. This technical detail contradicts common assumptions about centralized control.
Schwartz rejected characterizations of XRP as a Proof-of-Stake asset, explaining that the XRP Ledger uses a different consensus mechanism entirely. The network relies on a unique federated consensus algorithm that validates transactions without traditional mining or staking processes.
The CTO emphasized evaluating blockchain networks based on practical utility rather than ideological definitions of decentralization. He argued that security, trust, and performance metrics matter more than abstract concepts of distributed control.
XRP ETF Development Progress
WisdomTree’s proposed XRP exchange-traded fund has officially entered SEC review, marking the first formal evaluation of a US-based spot XRP ETF. The application, filed through the Cboe BZX Exchange, would track XRP prices using the CME CF Ripple-Dollar Reference Rate.
The SEC has 240 days to reach a decision while seeking public input on market manipulation and investor protection concerns. This timeline places the potential approval window in early 2026, assuming no delays or rejections occur.
The ETF structure would allow traditional investors to gain XRP exposure through standard brokerage accounts, eliminating the need for direct token custody or private key management. This accessibility could significantly expand XRP’s investor base beyond crypto-native users.
Regulatory Strategy Evolution
These developments occur as Ripple approaches the final stages of its prolonged legal battle with the SEC. The company has largely prevailed in court, with Judge Analisa Torres ruling that XRP itself is not a security, though some early institutional sales qualified as investment contracts.
Ripple’s current strategy focuses on establishing clear regulatory frameworks rather than fighting individual enforcement actions.
The company criticizes vague terms like “sufficient decentralization,” instead advocating for objective criteria including network maturity, public trading history, and absence of unilateral control.
The broader implications extend beyond Ripple’s specific situation. Success in establishing these legal precedents could benefit the entire crypto industry by providing clearer guidelines for token classification and regulatory compliance.
These coordinated efforts suggest Ripple is positioning for long-term regulatory clarity rather than short-term legal victories, potentially setting standards for how digital assets integrate with traditional financial systems.
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