In the letter, Ripple argued that most fungible digital assets traded on secondary markets should not be considered securities. It cited legal research suggesting that these tokens lack the ongoing obligations between issuers and buyers that typically define investment contracts.
To guide future regulation, Ripple proposed a practical framework. A token should only remain under securities law if the issuer has yet to fulfill material promises or if token holders still have enforceable rights against the issuer.
These material promises could include commitments to deliver a functioning network or provide financial returns. Ripple argued that regulatory oversight based on securities law becomes unnecessary without these elements.
It noted:
“We understand the SEC’s concern that the current state of the law may allow bad actors to evade accountability, or that well-intentioned actors may raise money in transactions resembling traditional securities offerings without corresponding oversight. However, if there is a gap in the law, it is Congress’s —not the SEC’s—to fill it.”
Ripple also urged the SEC to shift away from using “decentralization” as a key regulatory benchmark. It described the term as vague and inconsistent across legal, technical, and policy discussions.
Instead, the company proposed using “network maturity” as a more measurable and objective standard.
Under Ripple’s proposal, a digital asset could avoid securities classification if it meets three criteria: a significant market cap threshold, operation on a public and permissionless network for a set period, and any individual or group’s absence of unilateral control over the network’s core functions.
The firm concluded:
“It would be inappropriate to impose new securities law obligations—such as registration or disclosure—on tokens and networks that have operated and traded in broad liquid markets, openly, transparently, and permissionlessly for a significant time.”
