#Ripple has submitted an additional letter to the U.S. SEC, addressing a pivotal question about when a token should lose its security label.  

Stuart Alderoty, Ripple’s Chief Legal Officer, highlighted the company’s letter in a post on X. According to him, Ripple sent the letter to the SEC’s Crypto Task Force, which Commissioner Hester Peirce leads.

Ripple Addresses Question About Token’s Security Classification 

The letter focused on Peirce’s recent speech, The New Paradigm, in which she asked, “When does a digital asset separate from an investment contract?”

Responding to the question, Ripple drew on existing securities law analysis from prominent legal experts, such as Lewis Cohen et al. In that analysis, Cohen argued that the current U.S. investment contract law does not classify routine transfers of most fungible crypto assets in secondary markets as securities. 

Ripple emphasized that Judge Analisa Torres reinforced this view in her landmark decision in July 2023 in its case against the SEC. Specifically, while the judge ruled that Ripple’s sales of XRP to institutional clients constituted securities, she determined that the company’s secondary market sales of XRP did not constitute investment contracts. 

Moreover, Ripple mentioned that the judge also ruled that XRP is not a security in itself, even though it was previously sold to institutional investors as part of an investment contract. 

Congress, Not the SEC, Should Address Gaps in Securities Laws

Meanwhile, Ripple acknowledged the SEC’s concerns about the possibility of bad actors exploiting the current state of the law to evade accountability. Nonetheless, it emphasized that the U.S. Congress is responsible for filling any gaps in the law, rather than the SEC. 

“Lawmakers are in charge of establishing new legal standards. The SEC’s adherence to existing law would significantly reduce market confusion,” Ripple remarked...