Ripple Asks SEC to Change How Crypto Tokens Lose Their Securities Status

Key takeaways

• Ripple wants clearer rules for ending investment contracts
• Proposed Form TR should not become mandatory evidence
• Exchanges could gain protections when relying on filings

Ripple is asking the U.S. Securities and Exchange Commission to change how cryptocurrency projects establish that their tokens are no longer associated with securities investment contracts, arguing that the proposed rules could create new uncertainty without additional protections.

In an October 20 comment letter, Ripple supported the SEC's Regulation Crypto Assets proposal while requesting amendments to Rule 400, which would establish a process for certain investment contracts to cease being treated as securities.

The company argues that a token should not remain tied to securities-law obligations indefinitely simply because its original issuer once promised to develop or improve a project.

Ripple Wants SEC to Clarify When Investment Contracts End

The SEC's proposed framework distinguishes a cryptocurrency from the investment contract through which it may have been sold.

Under proposed Rule 400, qualifying issuers could file Form TR after completing or permanently ceasing the essential managerial efforts they previously promised investors.