Ripple CLO asks SEC to avoid overreach in crypto oversight

Key Takeaways

Ripple's CLO says the SEC's regulatory authority is strictly limited to securities transactions.
A token itself is not a security, although it may be involved in a security transaction, according to the executive.

Ripple's chief legal officer, Stuart Alderoty, expects the SEC to take a more judicially robust approach to crypto regulation this year, focusing on established legal principles rather than expanding its authority beyond the his legal mandate.

In Tuesday report outlining key principles for securities regulation, Alderoty called for the SEC's authority to be limited to securities transactions to prevent the regulator from overstepping its jurisdiction.

“Selling a gold bar with a contractual right, title, or interest in my gold mine? A potential security transaction,” he explained, using gold trading as an example to illustrate the difference between securities and asset sales. “Selling that same gold bar with no post-sale rights or obligations? Just sell assets—the SEC can't police it.”

Alderoty also expects the SEC to avoid expanding its jurisdiction based on subjective interpretations of disclosure requirements, urging the regulator to stay within its legally defined boundaries.

Regarding the classification of digital tokens, Alderoty hopes that the SEC will recognize that a token itself is not a security, although it may be involved in security transactions.

He also expects the SEC to abandon the idea that a token “evolves” from a security to a non-security—”a fabricated fallacy with no legal basis,” he said.

The SEC vs. Ripple lawsuit is expected to end

With the Trump administration coming in and the appointment of Paul Atkins as the new chairman of the SEC, it is widely expected that the year-long legal battle between the US security watchdog and Ripple will end sometime this year.

Given Atkins' known pro-crypto stance, his influence could create a more favorable environment for Ripple, which could lead to a faster settlement or even an SEC withdrawal of the case.

However, Alderoty emphasizes that the main question – whether XRP is classified as a security – remains a key one. He suggests that the Second Circuit Court's review could reinforce or even expand on Judge Torres' previous rulings, which were largely favorable to Ripple.

Analysts believe that if the SEC's enforcement approach changes or the agency withdraws its application, XRP could experience a significant price increase.