On May 27, 2025, Ripple submitted a detailed letter to the SEC’s Crypto Assets and Cyber Unit, challenging the SEC’s focus on decentralization and proposing a network maturity standard. Here are the details:
The challenge to the SEC’s decentralization focus: Ripple described “decentralization” as a vague term, which is inconsistent across legal, technical, and policy discussions. Ripple believes that using it as a key regulatory benchmark is inappropriate.
The proposed network maturity standard: Ripple proposed that a digital asset could avoid securities classification if it meets three criteria: reaching a significant market cap threshold, operating on a public and permissionless network for a set period, and having no individual or group with unilateral control over the network’s core functions. Ripple maintains that assets meeting these criteria are already integrated into the broader financial system, trading in deep, liquid markets and serving as the basis for regulated investment products like ETFs and futures. Therefore, Ripple argues that it would be inappropriate to impose new securities law obligations on tokens and networks that have met these standards.
The argument basis: Ripple cited legal research indicating that most fungible digital assets traded on secondary markets lack the ongoing obligations between issuers and buyers that are typical of investment contracts. Ripple also referenced the 2023 court ruling in its case, which stated that XRP was not a security in the secondary market, though some early institutional sales were considered investment contracts. Ripple contends that regulatory oversight based on securities law becomes unnecessary when there are no material promises from the issuer or enforceable rights for token holders.
Related topic:
