Ripple Seeks Revised Jurisdiction Terms in Senate Crypto Legislation

Ripple wants the Senate bill to define SEC and CFTC roles more clearly to avoid legal confusion in crypto oversight.

Ripple says the bill may lead to SEC control over open networks even when no securities are being traded.

Ripple supports a rule that exempts old tokens from securities laws if they run on open and permissionless networks.

Ripple Labs has submitted its formal response to the U.S. Senate Banking Committee’s Request for Information (RFI). The committee issued the RFI after releasing the draft version of the Crypto Market Structure Bill. The bill seeks to clarify digital asset regulation, including oversight by the SEC and the CFTC.

Ripple responded through its Chief Legal Officer. The company focused on specific legal and regulatory concerns raised by the bill. Their submission draws on over a decade of experience with regulators worldwide, including recent litigation with the SEC.

Jurisdiction Concerns Raised

Ripple's response highlighted flaws in how the draft allocates jurisdiction. It claimed the bill increases uncertainty between the roles of the SEC and the CFTC. According to Ripple, this confusion could hinder innovation and fail to offer legal clarity. The firm urged the committee to revise the bill to define jurisdiction boundaries more clearly.

Ripple also warned against relying on the term "ancillary assets" to classify digital assets. The firm stated this could trigger overreach from regulators and complicate compliance. It could also expose open blockchain networks such as Ethereum, Solana, and XRP to continuous SEC supervision. That exposure could remain even if transactions do not resemble securities offerings.

Proposals for Clearer Definitions

Ripple recommended using the CLARITY Act’s approach to asset classification instead. This method, they argue, reduces fragmentation and promotes legal certainty. They also emphasized the need to recognize the decentralized structure of mature blockchain networks. In Ripple's view, projects that operate without a central authority deserve a different regulatory treatment.

Ripple called for a framework that excludes long-standing tokens from securities laws. Specifically, they suggested a threshold of five years for tokens operating on open and permissionless networks. This proposal could exempt many established digital assets from future SEC enforcement.

Howey Test and Legal Safeguards

The firm also addressed the issue of the Howey Test. The bill does not clearly define whether the test applies to all digital assets. Ripple advised Congress to codify its application only if necessary. However, they warned against open-ended language that might let future SEC administrations stretch their authority.

Ripple appears concerned about potential misuse of power by future regulators. Their experience with ongoing legal battles likely shaped this cautious position. They stressed that consistent and fair application of rules is vital for market stability.

Preemption of State Laws Supported

Ripple supported federal preemption in specific regulatory areas. These include stablecoin issuance, market structure rules, custody standards, and token classification. The firm believes that preemption will prevent state-level inconsistencies and promote a unified national approach.