- Ripple calls for a framework separating securities status from trading assets.
- Ripple argues for XRP to be treated as a commodity post-fundraising.
- Ripple wants to end the “zombie promise” problem affecting secondary buyers.
Ripple Urges SEC to Adopt Lifespan Framework for XRP’s Status
Ripple has made a significant move by submitting a 9-page letter to the U.S. Securities and Exchange Commission (SEC), pushing for a clear framework on the status of XRP after the completion of its initial fundraising phase.
The company argues that the application of securities law should only be relevant during the primary sale, where there is a direct legal relationship between the issuer and the buyer. Once that relationship ends, Ripple suggests, the token should no longer be bound by securities laws, allowing it to be traded freely as a commodity on exchanges.
This proposal comes as the SEC, under the leadership of Chair Paul Atkins, begins revising the regulatory landscape for cryptocurrencies. Ripple’s submission comes at a crucial time when Congress is finalizing market-structure legislation and the SEC’s Crypto Task Force is set to finalize rules for the crypto sector.
Ripple’s letter asks the SEC to adopt a policy that aligns with the “lifespan of the obligation,” effectively ensuring that XRP and similar tokens are not permanently classified as securities just because they were once sold in a capital-raising transaction.
Ripple’s “Zombie Promise” Issue and the Case for Commodity Status
Ripple’s core argument revolves around the notion of “privity” a direct legal relationship that exists between the issuer and buyer during the primary sale. The company stresses that once that initial relationship ends, tokens like XRP should not remain under securities law jurisdiction.
In its letter to the SEC, Ripple warns against the practice of treating every issuer sale as a permanent capital raise. This situation leads to what Ripple refers to as the “zombie promise” problem, where decades-old statements made by issuers are deemed legally binding on secondary-market buyers who were not involved in the original sale.
Ripple advocates that in mature markets, such as established crypto exchanges, trading should be governed by commodity-style regulations, rather than continuing to apply securities law long after the initial sale.
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