Stuart Alderoty, Ripple’s chief legal officer, submitted a formal response to the U.S. Senate Committee on Banking, Housing, and Urban Affairs on August 5, 2025, sharply criticizing the committee’s draft legislation on digital asset regulation. According to Alderoty, the proposed framework not only fails to deliver the regulatory certainty the industry urgently needs but could permanently trap widely-traded tokens like XRP, Ethereum (ETH), and Solana (SOL) under the jurisdiction of the U.S. Securities and Exchange Commission (SEC).
Draft Bill Blurs Jurisdictional Lines, Pushes Most Tokens Into SEC 'Gatekeeping'
In his letter, Alderoty asserted that the draft “creates more ambiguity than clarity for the industry in its attempt to delineate SEC jurisdiction over digital assets.” He stressed that the framework would bring most tokens and projects into an SEC-administered gatekeeping and disclosure regime, even when sales or project activity fall outside the SEC’s traditional scope. “Additional revisions are required to refine jurisdictional boundaries and achieve a balanced oversight framework,” he added.
Of particular concern is the draft’s definition of “ancillary assets.” Under the proposed text, any token that was once sold through an investment contract could be presumed to remain indefinitely under SEC oversight. Alderoty rejected this presumption, arguing that it ignores the current utility and trading conditions of mature assets such as Ethereum, Solana, and XRP, and disregards the economic realities of their use. He warned: “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.”
Opposition to Unconstrained Howey Test, Call for Statutory Standards
Ripple also strongly opposed the draft’s continued reliance on the Howey test without congressional constraints. Alderoty noted that the test was historically misused under previous administrations, turning it into “a tool of limitless discretion.” He recommended that Congress provide specific statutory criteria to avoid further subjective interpretations and to ensure accountability.
To address the regulatory uncertainty at its root, Alderoty proposed several structural reforms: a grandfathering exemption for tokens that have been traded for a long time; statutory limitations on the SEC’s authority to redefine related-party transactions; and clear protections for protocol-level activities such as staking and consensus operations from securities laws.
Federal Preemption of State Laws to Establish National Consistency
Alderoty also called for federal legislation to preempt inconsistent state laws in key areas of digital asset oversight. “Federal legislation should preempt certain state laws to establish national consistency, reduce regulatory fragmentation, and support innovation,” he wrote. He specified that preemption is especially critical in areas like market structure, stablecoin issuance, custody standards, and token classification—where uniform federal oversight is essential—while preserving state authority in traditional areas such as consumer protection and fraud enforcement.
The sharp rebuttal from Ripple’s top legal executive underscores the deep anxiety within the U.S. crypto industry over the legislative direction. If the bill moves forward in its current form, not only would XRP’s legal status face renewed uncertainty, but the entire industry’s pursuit of a regulatory sandbox could become a vehicle for SEC power expansion. The Senate Banking Committee has not yet announced a timeline for next steps, but with congressional elections approaching next year, lobbying efforts are expected to intensify.