XRP’s Legal Classification and the CLARITY Act
The legal classification of XRP as a security is once again a hot topic within the U.S. cryptocurrency policy sphere as advocates highlight provisions in the latest draft of the CLARITY Act. They believe Section 105 of the proposed legislation could bolster the standing of XRP in secondary market sales by linking it to previous judicial findings.
Key Provisions of the CLARITY Act
Supporters of XRP have pointed to specific passages—specifically pages 110 to 112 of the draft—that contain language suggesting that if a court has already declared a digital asset transaction not to be classified as a security prior to the passage of the legislation, then it can’t be classified as such after the law takes effect. This contention is directly related to the 2023 verdict by Judge Analisa Torres, which ruled that secondary market transactions involving XRP did not constitute securities.
The proponents argue that if the CLARITY Act is passed as is, it could establish a federal protection for XRP’s status, particularly in relation to the Ripple case. However, it is essential to recognize that these discussions surround a draft that has yet to be legislated into law. The CLARITY Act still has to face committee approval, potential amendments, Senate voting, and possibly reconciliation with other legislative priorities before it can be enacted.
Decentralization Test and Network Tokens
Particularly noteworthy is Section 105, which proposes a decentralization test and introduces the concept of ‘network tokens’. Advocates suggest that XRP complies with this definition since the XRP Ledger operates autonomously from Ripple, facilitating payments and various utility transactions. They argue that the valuation of XRP should be considered in the context of network utilization, as opposed to being a direct claim on the profits of Ripple, asserting that the functionality of the XRP Ledger continues irrespective of Ripple’s involvement.
Nonetheless, this interpretation may not go unchallenged. Legal clarification of the draft’s language would still be necessary, and regulatory bodies might choose to scrutinize individual transactions, issuer behaviors, or broader market activities depending on the final bill’s stipulations.
Implications for XRP Investors
For XRP investors, the crux of the matter lies in the extent to which the CLARITY Act could diminish the likelihood of future SEC interventions regarding secondary market trading involving XRP. Supporters express hope that Section 105 may serve as a safeguard against any attempts by future administrations or SEC leadership from revisiting the classification of XRP as a security.
Reactions from Ripple Executives
Ripple’s CEO, Brad Garlinghouse, lauded the Senate Banking Committee for forwarding the CLARITY Act, claiming that millions of Americans are already engaged in cryptocurrency markets and advocating for regulations that ensure crypto users are afforded similar securities to those in other asset classes. Additionally, Ripple’s Chief Legal Officer, Stuart Alderoty, referenced the National Crypto Association’s 2026 report, which indicates that 67 million Americans currently own cryptocurrency—a demographic that includes 9.5 million from California, 5.94 million from Texas, and 4.71 million from Florida.
Future of the CLARITY Act
As Ripple navigates the complex landscape of U.S. digital asset regulation, clarity around token classification, oversight for exchanges, and overall market structure could hold significant implications for not just XRP, but also a range of other prominent tokens including Solana, Litecoin, and Dogecoin.
The markup session of the Senate Banking Committee is anticipated to be closely monitored by a diverse audience including crypto firms, financial institutions, investors, and advocacy groups. Reports indicate that Senator Elizabeth Warren has submitted over 40 amendments to the CLARITY Act, with some amendments potentially impacting the protections provided for tokens that have benefitted from previous judicial rulings. Warren has voiced concerns that the bill may jeopardize investors and national security, citing ambiguities linked to conflicting interests involving President Trump and his family’s involvement in crypto.
Additionally, one of her amendments would prevent the Federal Reserve from issuing master accounts to cryptocurrency companies, which affects businesses like Ripple, Anchorage Digital, Circle, and Custodia Bank. Other Democratic lawmakers also propose amendments addressing restrictions on stablecoin yields and regulations surrounding the taxation of crypto assets like Bitcoin and XRP.
Consequently, the upcoming markup session could serve as a crucial indicator of whether there is sustained support for the CLARITY Act in its proposed form.
