Ripple, the blockchain company behind XRP, argued that fungible cryptocurrencies are not securities when transferred in secondary transactions in a recent letter sent to the US Securities and Exchange Commission (SEC).

In its May 27 letter, Ripple cited US attorney and crypto law thought leader Lewis Cohen to support its claim. In his widely cited 2022 paper, “The Ineluctable Modality of Securities Law: Why Fungible Crypto Assets Are Not Securities,” he wrote:

“[T]here is no current basis in the law relating to ‘investment contracts’ to classify most fungible crypto assets as ‘securities’ when transferred in secondary transactions.”

In his paper, Cohen explained that in secondary transactions, an investment contract transaction is generally not present. He further claimed that fungible cryptocurrencies “neither create nor represent the necessary cognizable legal relationship between” a legal entity and the holder that is the “hallmark of a security.”

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SEC’s “new paradigm”

Ripple also referenced SEC Commissioner Hester Peirce’s May 19 “new paradigm” speech. She said she’d been voicing her dissent with the regulator’s approach to crypto, adding:

“Having emerged from the crypto dissent years, I am glad to be able speak to you today as the head of the Commission’s Crypto Task Force about a rational and coherent path forward and a new paradigm at the SEC.”

Peirce said that the SEC’s “approach to crypto in recent years has evaded sound regulatory practice and must be corrected.” She also said that most cryptocurrencies are not securities, adding:

“Most currently existing crypto assets in the market are not [securities]. My supplemental answer is that economic realities matter and non-security crypto assets may be distributed as part of an investment contract, which is a type of security.”

Ripple’s long fight with the SEC

The SEC had viewed a large portion of digital assets as securities, with the regulator’s former chair, Gary Gensler, stating in 2023 that most of the crypto market falls under the securities bracket. This stance led to a protracted legal battle between the SEC and Ripple.

The lawsuit first began at the end of 2020, when the SEC took action against Ripple and its executives, claiming that XRP sales constituted unregistered security offerings. Still, after the government’s stance on crypto changed with the election of current US President Donald Trump, Ripple has mostly won the battle, with the SEC recently dropping its appeal against a ruling favorable to the company.

In its recent letter to the SEC, Ripple also cited a ruling in the case noting that “the court held that certain of Ripple’s historical institutional sales of XRP were investment contracts,” while the secondary sales were not. Furthermore, the judge “determined that XRP itself is not a security.”

Magazine: XRP win leaves Ripple and industry with no crypto legal precedent set

Australia’s markets regulator has filed civil proceedings against Liang “Allan” Guo, the former director of Blockchain Global. 

Guo will face the court on “allegations relating to multiple breaches of his directors’ duties,” the Australian Securities and Investments Commission said in a May 28 press release.

ASIC alleged Guo made multiple breaches of directors’ duties relating to his dealings with ACX Exchange customer funds, and claimed he made false and misleading statements about those dealings and failed to maintain proper books and records. 

The now-liquidated Blockchain Global operated the ACX Exchange from mid-2016 until December 2019, when it collapsed as customers could no longer withdraw their assets. 

During liquidator’s examinations in 2022, the courts were told that ACX exchange took the cash invested by its customers to buy crypto and mingled the funds into one pooled fund, the Sydney Morning Herald reported at the time. 

The liquidators of Blockchain Global estimate that the company owed over 20 million Australian dollars ($12.8 million) in unsecured creditor claims to former customers of the ACX Exchange, ASIC said.

In November 2023, liquidators reported that Blockchain Global had 58.6 million Australian dollars ($37.7 million) owed to unsecured creditors. Of that total, 22.7 million Australian dollars ($14.6 million) were unsecured creditor claims received from former customers of the crypto exchange.

Guo not in country, ASIC says

ASIC said it began investigating Blockchain Global in January 2024 following the liquidators’ report. 

Related: Australia outlines crypto regulation plan, promises action on debanking

Guo was banned from leaving the country as the regulator investigated whether he committed any criminal offences, including transferring money from the collapsed exchange to pay his mortgage.

Guo left Australia in September 2024 after travel restraint orders expired, and he hasn’t returned, it noted. 

Meanwhile, ASIC is seeking the High Court’s permission to appeal a lower court’s ruling in favor of fintech firm Block Earner in a separate case. 

The regulator claimed the crypto company’s fixed-yield earning service was not a financial product.

Magazine: Bitcoin bears eye $69K, CZ denies WLF ‘fixer’ rumors: Hodler’s Digest

Outgoing US Commodity Futures Trading Commission commissioner Christy Goldsmith Romero says the exodus of the agency’s top brass is “not a great situation” for crypto regulations.

The CFTC could be headed by just one commissioner once the other four depart later this year, which Goldsmith Romero said in a May 27 interview at the Brookings Institution will make creating regulations harder because it leaves a less diverse pool of opinions. 

“I think it’s not a great situation if you have one person who’s determining what the rules should be; you lose the benefit of this back-and-forth, this push-and-pull as to what’s the right thing to do,” she said.

“I’ve always wanted to hear from my fellow commissioners about what makes sense to them, and there are many things that they’ve convinced me of and many things that I’ve convinced them of, so I think it does a disservice to regulation.”

Goldsmith Romero’s last day will be May 31, leaving Commissioner Kristin Johnson as the CFTC’s sole Democrat, who has also announced plans to depart the agency before 2026. 

Republican Commissioner Summer Mersinger is also leaving on May 30 to join the crypto advocacy organization the Blockchain Association as CEO and Republican acting CFTC Chair Caroline Pham said on May 15 that she plans to move “to the private sector” if Brian Quintenz were to be confirmed head of the agency.

If Quintenz is confirmed, and Pham follows through on leaving, it would leave him solely in charge of the agency. Five commissioners are supposed to make up the CFTC, and no more than three can be from the same political party.

Goldsmith Romero said that during her tenure, all the commissioners had different perspectives and experiences that, when brought together, were “really helpful.”

“So what happens if the CFTC gets down to one and gets new authority for crypto? It’s going to be really, really hard; you’re not going to have the same push and pull,” she said.

The Trump administration has floated the idea of handing the reins of crypto regulation to the CFTC in the past. Congressional Republicans have also been drafting bills to give the CFTC greater oversight over the industry, 

Retail customer Definition should be CFTC priority 

In the future, Goldsmith Romero thinks the CFTC should work on defining a retail customer to ensure the influx of fresh investments in “crypto and some other products” has a similar retail customer protection regime to the Securities and Exchange Commission.

Related: Crypto perp futures coming ‘very soon,’ says CFTC’s Mersinger

“I came from the SEC with an investor protection regime, you want people to know their rights and risk if they take a risk and they lose that’s on them,” she said.

“But you want to have some basic things like exchanges that are registered that have some basic requirements and have to follow the law and this is, I think, the main thing that needs to happen.”

Goldsmith Romero said other “extremely basic” rules could include a ban against co-mingling a company’s assets with customer funds, and brokers, exchanges and clearing houses being required to register with the SEC, the CFTC or in some cases, both.

Magazine: Bitcoin bears eye $69K, CZ denies WLF ‘fixer’ rumors: Hodler’s Digest, May 18 – 24