In a powerful new statement, Ripple has submitted its official response to the U.S. Securities and Exchange Commission’s (SEC) crypto regulatory inquiry, reinforcing its stance that the agency has overstepped its legal boundaries. The document, released on March 21, is Ripple’s answer to an SEC request titled “There Has to Be a Way Out”, issued by Commissioner Hester Peirce, a well-known crypto advocate.
Shared by Ripple’s Chief Legal Officer Stuart Alderoty, the response reflects growing frustration over the SEC’s prolonged enforcement-led approach under Chairman Gary Gensler. Ripple argues that the Commission has misinterpreted the definition of “investment contracts”, using it to justify aggressive actions against crypto innovators.
The Core Argument: SEC’s Authority Has Limits
Ripple begins by reminding regulators that the SEC can only act within powers granted by Congress, referencing West Virginia v. EPA (2022) as a legal precedent. The company asserts that the SEC cannot stretch legal definitions to bring decentralized crypto assets under securities law.
“The SEC’s authority is not a choose-your-own-adventure book. It cannot rewrite the law,” Ripple’s response states.
Ripple contends that for a true investment contract to exist, there must be a clear investment of money and a promoter promising to deliver profit—criteria that most cryptocurrencies and decentralized networks do not meet.
Drawing on a powerful analogy, Ripple compares buying digital assets to purchasing a painting with the hope that the artist’s fame will increase its value. That expectation alone, they argue, does not transform the purchase into a security.
Staking Is Not a Security, Ripple Says
Dey There notes that the response also defends staking and decentralized yield protocols, stating that passive returns generated by public, permissionless networks should not be considered securities.
“Programmatic rewards from open networks do not constitute securities,” Ripple argues, taking aim at recent enforcement actions against staking services.
Support for Safe Harbor and Legislative Clarity
Ripple’s message to the SEC is not just critical—it’s constructive. The company expresses support for Commissioner Peirce’s “Safe Harbor 2.0” proposal, a framework that would allow crypto startups a grace period to develop without immediate threat of regulatory action.
Ripple also calls for:
- Congressional clarity on crypto regulation
- ICO-specific frameworks with investor protections
- Clear exclusions for staking and decentralized protocols
- The establishment of regulatory sandboxes for experimentation
These measures, Ripple argues, would create a balanced regulatory environment that fosters innovation without compromising consumer protection.
As Dey There emphasizes, this submission is more than a rebuttal—it’s a blueprint for modern crypto regulation. Whether the SEC takes it to heart remains to be seen, but Ripple has once again positioned itself as one of the industry’s most vocal advocates for rational and transparent oversight.
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