Ripple's Chief Legal Officer Stuart Alderoty has fired a broadside at a U.S. Senate draft legislation on digital assets, warning that the bill could lock XRP and other major tokens into endless regulatory limbo under the Securities and Exchange Commission (SEC). In a formal response submitted to the Senate Committee on Banking, Housing, and Urban Affairs on August 5, Alderoty argued that the proposed framework fails to provide much-needed regulatory certainty and instead entrenches confusion.
Ambiguous Jurisdictional Divide
The draft legislation attempts to split oversight responsibilities between the SEC and the Commodity Futures Trading Commission (CFTC). However, Alderoty asserts that this approach creates more ambiguity than clarity. "The draft brings 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," he wrote. He stressed that additional revisions are required to refine jurisdictional boundaries and achieve a balanced oversight framework.
Ancillary Assets Definition Raises Red Flags
A central concern in Alderoty's letter is the bill's definition of "ancillary assets," which could imply that any token once sold through an investment contract remains indefinitely under SEC jurisdiction. This presumption, he argued, ignores the current utility and trading conditions of mature assets like Ethereum (ETH), Solana (SOL), and XRP. "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," he warned.
Howey Test Abuse and Structural Reforms
Alderoty also strongly opposed continued reliance on the Howey test without congressional constraints, noting that its historical misuse under previous administrations turned it into "a tool of limitless discretion." He recommended that Congress provide specific statutory criteria to avoid further subjective interpretations and ensure accountability. To address these issues, Ripple advocated for several structural reforms: a grandfathering exemption for long-traded tokens, statutory limits on the SEC's authority to redefine related-party transactions, and clear protections for protocol-level activities such as staking and consensus operations.
Federal Preemption for National Consistency
The Ripple legal chief 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 stated. Preemption is particularly critical in areas like market structure, stablecoin issuance, custody standards, and token classification, where uniform federal oversight is essential. However, he emphasized that state authority in traditional areas such as consumer protection and fraud enforcement should be preserved.
Alderoty's response arrives amid a broader debate in the U.S. Congress over comprehensive crypto legislation. The Ripple executive's stance reflects industry-wide fears that overbroad regulatory frameworks could stifle innovation and penalize mature projects that have long moved beyond their initial fundraising phases. If the Senate bill proceeds without significant changes, it could fundamentally reshape the classification and oversight of digital assets.