- Ripple CLO Stuart Alderoty submitted a letter to the SEC requesting clarity on the classification of crypto tokens.
- He argued that most fungible crypto tokens do not meet the definition of securities under current U.S. law.
- Alderoty referenced legal research stating that investment contracts require a clear legal relationship between buyer and seller.
Ripple CLO Stuart Alderoty has formally requested the U.S. Securities and Exchange Commission (SEC) to clarify how it classifies crypto assets. His letter emphasized that not all digital tokens should fall under securities regulations, especially in secondary market transactions. This move comes as part of Ripple’s broader push for regulatory clarity amid its ongoing legal battle with the SEC.
Ripple CLO Questions SEC’s Authority Over Crypto Assets
Ripple CLO raised serious questions about the SEC’s current approach to regulating digital assets and their classification. He said most fungible crypto tokens traded in the secondary market don’t automatically fall under current laws. The Ripple CLO cited a legal paper to support the need for a buyer-seller relationship in investment contracts.
In his letter, Ripple CLO referenced Judge Torres’ ruling in the SEC vs. Ripple case involving XRP’s status in secondary sales. However, that judgment determined that in those transactions, XRP was not a security, which is traceable to Alderoty’s argument. This case allowed him to stress that many digital tokens aren’t investment contracts at all.
Ripple CLO insisted that market confusion would decrease if the SEC adhered strictly to existing legal definitions. He asked the SEC to respect, not preempt its jurisdiction, and not create new rules without Congressional backing. Regulators, he said, should not impose continuing obligations on holders in secondary markets.
Crypto Tokens May Escape Security Label
Ripple CLO outlined a framework to determine when a token is independent of its initial sale agreement. If the issuers deliver on their initial promises and the holders have no rights to enforce the terms of the promise, he argued, then the token is separate. It would make little sense for the data to be open but not who puts in applications, though, he said, promising accountability without burdening downstream participants.
His framework would separate the asset from the investment contract to create legal consistency. The Ripple CLO argued that this model promotes fairness and legal precision without restricting innovation in crypto markets. That would, he said, help separate the responsible from the bad.
Ripple CLO called for this structure to become part of official guidance for the crypto industry. He says sticking to existing law will give investors confidence. He said only Congress could set new legal standards for crypto regulation.
Calls Grow for Congressional Crypto Action
Ripple CLO’s letter aligns with broader industry efforts to reform crypto regulations. The Blockchain Association, meanwhile, had approached the SEC last month to drop equity-style rules for digital assets this month. Their demand signals that frustration is rising across the crypto sector.
SEC Commissioner Hester Peirce leads the Crypto Task Force, which aims to bridge traditional and digital finance. The Ripple CLO directed his arguments toward this body, seeking a more balanced approach. He also highlighted recent discussions between the Task Force and BlackRock.
Ripple CLO maintains that investor protection and innovation are both achievable with clear, consistent rules. Rather than the SEC’s regulatory overreach, his call reflects the gravity with which Washington ought to address the need for Congress to act. Of course, the aforementioned points are central to the movement of future U.S. crypto law in the wake of the SEC vs. Ripple case.