XRP: Ripple Pushes Back Against SEC Crypto Classification

XRP has once again taken center stage as Ripple challenges the U.S. Securities and Exchange Commission over the legal classification of cryptocurrencies. In a recent letter addressed to the SEC, Ripple asserted that fungible digital assets like XRP should not be considered securities when traded in secondary markets.

The letter, dated May 27, builds its argument on the legal scholarship of attorney Lewis Cohen. Referencing his notable 2022 analysis, “The Ineluctable Modality of Securities Law,” Ripple emphasized Cohen’s findings that secondary transactions of fungible crypto assets generally do not meet the criteria of investment contracts. According to Cohen, for an asset to be classified as a security, it must establish a distinct legal relationship with its holder—a critical component often absent in such decentralized exchanges.

Ripple’s position aligns with growing industry sentiment that regulators must re-evaluate outdated frameworks when addressing blockchain-based assets. The company pointed out that secondary crypto trades don’t fit the traditional definition of securities transactions, as they lack direct promises of profit from third-party efforts.

These arguments come amid shifting internal dynamics within the SEC itself. Commissioner Hester Peirce, known for her pro-crypto stance, recently delivered a speech titled “A New Paradigm” on May 19. In her address, she offered a refreshing departure from the Commission’s more rigid interpretations of digital asset law. She openly criticized the agency’s past actions, suggesting that its regulatory tactics often strayed from sound practices. Most notably, Peirce stated that the majority of cryptos in circulation wouldn’t legally qualify as securities under existing laws.

Peirce added that while some crypto assets might be offered within the context of an investment contract, that doesn’t necessarily make the assets themselves securities. Her remarks indicated a willingness to adopt a more balanced approach to regulation, hinting at improvements in how the SEC could address future blockchain innovation.

Ripple’s latest correspondence with the SEC is part of a longstanding legal saga that began in late 2020. The Commission sued Ripple, asserting the company’s XRP distributions were unregistered securities offerings. Under previous leadership, the SEC broadly categorized most crypto assets as securities, resulting in a wave of enforcement actions across the industry.

Despite intense scrutiny, Ripple has achieved significant legal victories in recent years. A federal judge ruled that XRP is not inherently a security, though certain institutional sales were deemed investment contracts. Importantly, the court also found that XRP’s secondary sales did not meet that threshold. These distinctions form a central part of Ripple’s argument that broader cryptocurrency markets should not be reined in by securities laws intended for traditional financial instruments.

Ripple also noted that the SEC recently withdrew its appeal against parts of the case favoring the company. This decision follows the shifting political and regulatory environment, which has led to a softer approach toward digital assets. Armed with legal wins and increasing industry support, Ripple is pushing for clearer, more modern interpretations of financial laws that better reflect the decentralized nature of crypto ecosystems.

Ripple continues to advocate for a refined understanding of digital assets, emphasizing that not all crypto-related activity falls under current securities legislation. By citing well-regarded legal perspectives and regulatory statements, the company aims to stimulate meaningful dialogue about the future of blockchain regulation.

The SEC now faces mounting pressure to revisit its assumptions about blockchain-based technologies. Like Ripple, many stakeholders believe a new framework—one that distinguishes between initial offerings and autonomous secondary markets—is essential for fostering responsible innovation in the crypto space. The unfolding legal narrative signals a pivotal moment for XRP and sets a potentially precedent-setting tone for digital asset classification in the United States.

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most of the crypto market falls under the securities bracket

began at the end of 2020

dropping its appeal against a ruling favorable to the company

Related: Expert Advice: Sell XRP If You’re Confused

XRP win leaves Ripple and industry with no crypto legal precedent set