The U.S. Senate’s latest attempt to regulate crypto has drawn serious fire—especially from Ripple’s top lawyer, Stuart Alderoty, who’s sounding the alarm: this bill could trap tokens like XRP in an endless loop of SEC oversight, with no clear escape route.
On August 5, Alderoty fired off a sharply worded response to the Senate Banking Committee, picking apart the proposed legislation. His main critique? Instead of clarifying who controls what, the draft muddies the waters—further entrenching the regulatory chaos the crypto world is already drowning in.
> “This proposal doesn’t create clarity—it creates confusion,” Alderoty wrote. “It ropes nearly every token and project, even those outside traditional securities definitions, into a SEC-led disclosure regime.”
One of the bill’s most controversial points is its vague take on “ancillary assets.” Alderoty warned that if passed as is, it could mean that any token—even long-mature ones like Ethereum, Solana, or XRP—sold at any point under an investment contract might forever fall under SEC jurisdiction. That means even tokens actively being used in decentralized networks for utility—not speculation—would still be treated as if they were securities.
> “This isn’t regulation. It’s a regulatory trapdoor,” he argued. “It ignores how these assets function today and could give the SEC indefinite authority over open, permissionless ecosystems.”
Ripple also challenged the bill’s continued reliance on the outdated Howey Test—a legal relic, Alderoty claimed, that has been stretched and distorted beyond reason.
> “Without clear boundaries set by Congress, the Howey Test becomes a weapon of unchecked power,” he wrote. Instead, he urged lawmakers to establish objective rules, reduce discretion, and restore fairness and predictability to digital asset policy.
Among Ripple’s recommended fixes? A grandfather clause for long-established tokens, limits on the SEC’s ability to unilaterally redefine transaction types, and clear legal protections for foundational blockchain operations—like staking and consensus mechanisms.
Finally, Alderoty stressed the need for federal preemption—a move that would override conflicting state laws in core areas such as token classification, stablecoins, and custody standards.
> “We need national consistency,” he said. “Let states focus on protecting consumers and fighting fraud. But when it comes to market structure, let’s have one clear federal voice.”
In short, Ripple’s legal chief isn’t just asking for tweaks—he’s calling for a total rethink. Because in his eyes, this bill doesn’t just miss the mark—it risks setting the entire U.S. crypto industry back for years.$XRP