SEC Regulation Could Clear Path for Ripple to Exit XRP Investment Contract Label
The US Securities and Exchange Commission (SEC) has proposed a new framework for how crypto companies raise capital in the country. The regulation, dubbed Regulation Crypto Assets, aims to provide clarity on how federal securities laws apply to crypto transactions.
Under the proposal, certain crypto offerings would be allowed without SEC registration if they meet specific thresholds: up to $5 million over four years or up to $75 million annually. Additionally, a conditional safe harbor would be created for crypto assets once an issuer's essential managerial efforts have ended, as well as preemption of certain state securities registration requirements.
However, legal analyst Bill Morgan argues that the new fundraising exemptions don't really benefit Ripple and XRP significantly. According to him, Ripple currently releases $300 million worth of XRP from escrow monthly, far exceeding the proposed $75 million annual threshold.
Morgan sees more relevance in the safe harbor provision, which would allow Ripple to certify that its managerial efforts tied to XRP have permanently ceased. This could help remove the investment contract classification applied to some of Ripple's institutional sales and potentially resolve a permanent injunction against violating securities laws.