News

Ripple Proposes ‘Maturity’ Test to SEC for Clarity on Tokens and Investment Contracts

In a letter to SEC, Ripple CLO Stuart Alderoty said the most fungible crypto assets in secondary markets do not qualify as securities.
Published by
Ripple Proposes ‘Maturity’ Test to SEC for Clarity on Tokens and Investment Contracts

Highlights

  • Ripple CLO cited Judge Torres’s ruling in SEC v. Ripple and Lewis Cohen's paper on securities law.
  • Alderoty proposed a framework to define when tokens separate from investment contracts.
  • He also emphasized that Congress must establish new legal standards to address gaps in crypto regulation.

Ripple’s Chief Legal Officer, Stuart Alderoty, has formally urged the U.S. Securities and Exchange Commission (SEC), requesting the regulator to conduct a ‘maturity’ test and provide clear guidance distinguishing crypto tokens from investment contracts. In a letter addressed to the SEC’s Crypto Task Force, led by Commissioner Hester Peirce, Alderoty asserted that under current regulations, most fungible crypto assets should not be classified as securities

Advertisement

Ripple CLO Demands Crypto Regulatory Clarity

In his SEC letter, Alderoty cited the ‘The Ineluctable Modality of Securities Law’ paper by Lewis Cohen, stating that an investment contract requires a legal relationship between a buyer and a seller. However, this is not necessary in the secondary market transactions of the crypto market, he said.

In the ongoing SEC vs Ripple lawsuit, the Ripple CLO also pointed out the ruling by Judge Torres where XRP was deemed not a security in secondary sales, although the earlier institutional sales met the criteria for investment contracts.

While acknowledging the regulatory gaps in the system, Alderoty stated that Congress, and not the SEC, should address them. He wrote:

“Absent delegated authority, new legal standards must be established by lawmakers. SEC guidance that adheres faithfully to existing law—something that eluded the prior administration—would go a long way toward reducing market confusion”.

Advertisement

How Will Crypto Tokens Separate From Investment Contracts?

Stuart Alderoty has proposed a ‘maturity’ framework that would determine how tokens separate from investment contracts. The Ripple CLO added that if issuers fulfill material promises made during the initial sale and secondary holders lack enforceable rights against them, the token should be considered independent of the contract.

“This approach preserves accountability for bad actors without imposing ongoing or indeterminate obligations on downstream market participants,” he added.

Calling for Congress to act, Alderoty reiterated the importance of a regulatory framework that ensures investor protection while fostering innovation. Earlier this month, the Blockchain Association also urged the SEC to drop equity-style regulations for the crypto market.

SEC Commissioner Hester Peirce has been leading the Crypto Task Force formed earlier this year in March. The goal of this unit is to serve as a bridge between the traditional and crypto markets, thereby bringing greater regulatory clarity to the overall space. World’s largest asset manager BlackRock, which has a strong presence in the digital assets market, recently held discussions with the Crypto Task Force.

Advertisement
Share
Bhushan Akolkar

Bhushan is a seasoned crypto writer with over eight years of experience spanning more than 10,000 contributions across multiple platforms like CoinGape, CoinSpeaker, Bitcoinist, Crypto News Flash, and others. Being a Fintech enthusiast, he loves reporting across Crypto, Blockchain, DeFi, Global Macros with a keen understanding in financial markets. 

He is committed to continuous learning and stays motivated by sharing the knowledge he acquires. In his free time, Bhushan enjoys reading thriller fiction novels and occasionally explores his culinary skills. Bhushan has a bachelors degree in electronics engineering, however, his interest in finance and economics drives him to crypto and blockchain.

Published by
Why trust CoinGape: CoinGape has covered the cryptocurrency industry since 2017, aiming to provide informative insights to our readers. Our journalists and analysts bring years of experience in market analysis and blockchain technology to ensure factual accuracy and balanced reporting. By following our Editorial Policy, our writers verify every source, fact-check each story, rely on reputable sources, and attribute quotes and media correctly. We also follow a rigorous Review Methodology when evaluating exchanges and tools. From emerging blockchain projects and coin launches to industry events and technical developments, we cover all facets of the digital asset space with unwavering commitment to timely, relevant information.
Investment disclaimer: The content reflects the author’s personal views and current market conditions. Please conduct your own research before investing in cryptocurrencies, as neither the author nor the publication is responsible for any financial losses.
Ad Disclosure: This site may feature sponsored content and affiliate links. All advertisements are clearly labeled, and ad partners have no influence over our editorial content.

Recent Posts

  • News

Canary XRP ETF Filing Removes SEC Delay Clause, Targets November Launch

Canary Funds has filed an updated S-1 registration for its XRP spot exchange-traded fund (ETF).…

October 31, 2025
  • News

CFTC, SEC Launch ‘New Era of Collaboration’ to Clarify Crypto Rules, End Regulation by Enforcement

The U.S. Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) have entered…

October 31, 2025
  • News

Senate Committee Finalizes Updated Crypto Market Structure Bill Draft, Release Expected In Days

The U.S. Senate committee is set to release an updated draft of the Crypto Market…

October 30, 2025
  • News

€648 Billion Nordea To Allow Customers to Trade Bitcoin-Linked ETFs

Nordea Bank, one of Europe’s largest financial institutions, is allowing customers to trade Bitcoin-linked funds…

October 30, 2025
  • News

Uphold Joins Gemini, Relaunches XRP Debit Card Following SEC Lawsuit Resolution

Uphold has relaunched its XRP Debit Card across the United States following the resolution of…

October 30, 2025
  • Altcoin News

Breaking: XRP Treasury Evernorth Debuts on Nasdaq Under XRPN Ticker After $1B Token Purchase

Evernorth Holdings, a Ripple-backed XRP treasury company, has officially made its debut on Nasdaq under…

October 30, 2025