Ripple’s Advocacy for Regulatory Change
On January 9, 2026, Ripple took a significant step by addressing a letter to the SEC’s Cryptocurrency Task Force, advocating for a transformative change in the regulatory landscape for digital assets. The company criticized the current emphasis on the increasingly controversial ‘decentralization’ test as a way to determine the legal status of crypto assets. Instead, Ripple is urging that regulatory scrutiny should shift towards defining clear and enforceable rights and obligations associated with these assets to ascertain their classification under securities law.
Concerns About Decentralization
Ripple contends that the concept of decentralization is not only subjective but also varies greatly based on multiple influencing factors such as the contributions to the code, distribution of nodes, economic incentives, and governance involvement. Since decentralization does not exist in a binary fashion but rather along a spectrum, relying on it as a legal standard generates unpredictability and varying legal consequences.
In their advocacy, Ripple pointed out that such an approach could result in ‘false negatives’, where certain digital assets escape necessary oversight by appearing decentralized, and ‘false positives’, where established market assets are excessively regulated due to ongoing involvement by developers or holders.
Proposed Shift in Regulatory Focus
The implications of this proposed shift in focus are substantial. Ripple is pushing regulators to distinguish the original sale of a security from the asset itself. They argue that once the initial contractual obligations linked to an offering are fulfilled, subsequent trades in the secondary market should not continue to be classified as securities. Additionally, Ripple recognizes that the legal concept of privity—which establishes the connection between the issuer and the first buyer—only has significance in primary sales, not in more developed market conditions.
This perspective aligns with the stance of SEC Chair Mark Atkins, who posits that the obligations associated with an offering naturally diminish over time. Ripple’s letter calls for well-defined, proactive regulations that champion a rights-based framework, which would effectively disengage the asset from its original offering.
Fostering Innovation and Participation
By advocating for greater legal clarity, Ripple aims to foster an environment conducive to responsible technological innovation and encourage broader institutional participation within the crypto market. In doing so, they are guiding the SEC towards regulations that reflect the evolving nature of digital assets in 2026 and beyond.
Establishing a Precedent for the Cryptocurrency Sector
Ripple’s initiative is establishing a precedent that could influence the entire cryptocurrency sector. Their emphasis on enforceable obligations, the concept of privity, and the gradual expiration of contractual responsibilities seeks to lay the groundwork for regulations that ensure investor protection while enabling digital assets to flourish without excessive regulatory constraints. This practical approach also outlines a roadmap for effectively differentiating between assets and the offerings that initially introduced them to the market, promoting a more transparent, efficient, and innovative market environment.
