- Ripple’s Stuart Alderoty criticizes the SEC’s unchecked power over crypto tokens.
- Calls for Congress to define clear boundaries to protect users and innovation.
- Supports exemptions for long-traded tokens like XRP and ETH from new rules.
Stuart Alderoty, Ripple’s Chief Legal Officer, responded to a congressional Request for Information with a detailed letter outlining Ripple’s views on the future of crypto regulation.
He welcomed the chance to speak on behalf of a company that has spent years dealing with regulators worldwide and defending itself against the SEC.
In his letter to the House Financial Services Committee, Alderoty said the current draft legislation brings more confusion than clarity.
Instead of fixing the divide between the SEC and CFTC, it risks pulling nearly every token into SEC control. This could include tokens that are widely traded and not tied to securities, such as XRP, ETH, or SOL.
According to Ripple, the draft law doesn’t clearly separate tokens that were once part of an investment offering from today’s use in open markets. That lack of clarity could give the SEC open-ended control over assets that shouldn’t fall under its watch.
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SEC’s Use of Howey Test Draws Fire
A major part of Ripple’s response focused on the Howey test, the legal standard the SEC uses to decide if something is a security. Alderoty said the SEC had twisted Howey far beyond its original meaning. What started as a flexible guide had become, in Ripple’s view, a tool for aggressive enforcement without clear rules.
Ripple urged Congress not just to leave that power unchecked. If lawmakers want to use Howey in new rules, they should write it into law in a way that can’t be easily misused.
The test should focus on real investment promises, cases where a team makes clear, enforceable commitments to create value. Simply buying a token, hoping it might increase in value, shouldn’t be treated the same as buying stock.
Ripple also called for Congress to require the SEC to write formal rules that define “investment contract” clearly, so everyone, from token issuers to exchanges, knows what the law actually says.
Ripple Backs Market Maturity and Federal Clarity
Ripple’s letter also asked Congress to avoid penalizing tokens that have been on the market for years. Tokens that have traded openly for long periods should be considered outside the scope of securities laws.
These include assets on public blockchains that aren’t run by a single group or company. Creating a rule to “grandfather in” such tokens would prevent confusion and protect the markets from sudden shifts in oversight.
Alderoty warned against giving the SEC too much leeway in defining key terms like “related parties.” Any new restrictions on token sales or rules about insiders need to be based on law, not left to SEC interpretation.
Finally, the company backed a national crypto framework that limits conflicting state laws while keeping states involved in fraud and consumer protection cases.
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