Ripple Labs has urged the US Senate to revise its proposed crypto legislation, warning that the current draft introduces more confusion than clarity.

The blockchain firm submitted its response on Aug. 5, addressing concerns about regulatory overreach and vague definitions that could stifle innovation across the digital asset space.

The comments come in response to the Senate’s call for feedback on the draft of the Responsible Financial Innovation Act of 2025, which was released on July 22.

The bill aims to modernize crypto oversight by expanding regulatory tools, improving consumer protections, and providing clearer classification rules for digital assets.

Ripple highlight concerns

One of Ripple’s key concerns is the bill’s treatment of “ancillary assets,” a vague term that could place many digital tokens under SEC jurisdiction.

The company warns that this could lead future SEC leadership to interpret the regulations loosely, potentially enforcing policies that undermine the growth of the crypto space.

According to the firm:

“This approach could subject long-established, widely traded tokens operating on open and permissionless networks, including ETH, SOL, and XRP, to perpetual SEC oversight, even when current or future transactions bear none of the hallmarks of a securities offering.”

Moreover, Ripple emphasized that assets tied to past investment contracts should not be perpetually subject to SEC jurisdiction.

The company argues that the SEC’s authority should be limited to the specific transaction in question, not extended to future trades of the asset.

The firm noted:

“The approach taken by the draft provides a backdoor to assert jurisdiction over present-day transactions based on conduct that is either irrelevant to the transaction at issue or barred from enforcement by fundamental legal protections.”

Considering this, Ripple proposed a fixed time period for SEC jurisdiction over tokens initially sold as part of an investment contract.

The company also called for Congress to clarify the application of the Howey Test, a standard used to determine whether an asset is a security, ensuring it is consistently applied without leaving room for subjective interpretations that could destabilize the market.

It added:

“If Congress intends to codify the Howey test, it should do so in a way that prevents misuse or manipulation by the SEC.”

Calls for legal clarity

In addition to concerns over SEC powers, Ripple urged lawmakers to provide clear guidelines on which blockchain activities, such as staking, mining, and governance, should be regulated as securities.

The company argued that uncertainty surrounding these activities could discourage innovation and hinder the broader adoption of blockchain technologies.

It stated:

“To avoid misapplication of the Howey test, it should be explicitly stated that ‘entrepreneurial or managerial efforts’ do not include core network functions or routine administrative services.”

Meanwhile, Ripple also supported a provision in the bill aimed at protecting tokens actively traded for at least five years, suggesting it could offer protection from retroactive enforcement.

The RLUSD issuer believes this would provide more predictability and stability for established digital assets while helping the industry move forward confidently.

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In line with US President Donald Trump’s regulatory agenda aimed at fostering innovation and broader adoption of cryptocurrencies in the country, Fox journalist Eleanor Terret has reported that a new market structure discussion draft from the House of Representatives aims to clarify the treatment of digital commodities.

Specifically, it asserts that transactions involving the sale of digital commodities will not be classified as securities, provided these transactions do not grant purchasers any ownership interest in the issuer’s business, profits, or assets. 

Proposed Legislation Seeks Clarity On Crypto Transactions

This proposed legislation indicates that if an individual buys or sells digital commodities on the secondary market—rather than directly from the issuer—the transaction will not automatically trigger US securities laws unless it confers some form of ownership or claim on the company’s profits or assets. This distinction is crucial for fostering a more favorable environment for crypto trading and investment.

The draft bill outlines several critical amendments to existing laws, particularly the Securities Investor Protection Act of 1970. Notably, it defines “investment contracts” in a manner that excludes certain digital commodities from being classified as securities. 

This means that secondary market transactions involving crypto assets may not be subject to the stringent regulations typically applied to securities under various acts, including the Securities Act of 1933 and the Investment Advisers Act of 1940.

VanEck’s Matthew Sigel Highlights Key Changes 

Matthew Sigel, head of digital asset research at asset management firm VanEck, summarized the implications of the draft bill by highlighting several key points. 

One major change is the removal of income and wealth limits for retail buyers, which opens the market to a broader audience. Additionally, the bill eliminates the need for accredited investor checks, simplifying access to investment opportunities in crypto assets

Another important aspect of the draft is the introduction of a clear decentralization test, which requires that no single entity has unilateral control over a digital commodity. Projects that do not meet this criterion will face scrutiny, as holders of more than 10% of the project must be disclosed while it remains centralized. 

The bill also provides exemptions for decentralized finance (DeFi) protocols, as long as they are non-custodial and do not exercise discretion over user funds.

Moreover, the draft defines stablecoins without categorizing them as securities, providing much-needed clarity for these increasingly popular digital assets. 

It also outlines an optional early registration path for issuers and emphasizes the need for joint rulemaking between the SEC and the Commodity Futures Trading Commission (CFTC), further signaling a collaborative approach to crypto regulation.

Featured image from DALL-E, chart from TradingView.com 

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