Ripple CEO: Next Two Weeks Critical for U.S. Crypto Legislation

Ripple CEO Brad Garlinghouse warned on Tuesday at the Consensus Miami conference that the next two weeks are pivotal for passing broader cryptocurrency legislation, as the Senate Banking Committee prepares for a critical hearing. According to Garlinghouse, if the Senate Banking Committee does not hold that markup, the chances of a bill passing into law drop “precipitously.” As stated in his remarks: “If it doesn’t happen, then I think the likelihood is going to drop precipitously because if it gets into midterms — it’s going to be too much of a loaded issue. Then, post-elections in the fall, I think the likelihood that it gets picked up is even lower.”

Legislative Status and Obstacles

Pressure has been building to pass a broad crypto bill that would regulate the industry at the federal level for the first time by allocating jurisdiction between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The House passed its version, nicknamed Clarity, last year, but the Senate’s version has progressed less smoothly.

A bill must pass out of both the Senate Agriculture Committee and the Senate Banking Committee. The agriculture committee passed its version, but the banking panel faced a major obstacle in how to treat stablecoin rewards. Last week, Senators Angela Alsobrooks (D-Md.) and Thom Tillis (R-N.C.) reached a compromise that could clear the way for a markup this month. Still, other issues remain over crypto-related conflicts of interest tied to President Donald Trump and concerns around illicit finance.

Looming November midterm elections further complicate the timeline to pass a bill, as lawmakers shift focus to competitive races, leaving less bandwidth for passing legislation.

Regulatory Agency Actions

In the absence of Congress acting, agencies like the SEC and CFTC have moved forward in clarifying their stances on crypto in part through guidance and a token taxonomy that said most cryptocurrencies were not securities. However, legislation adds a level of permanency that neither agency can achieve on its own when a new presidential administration rolls in down the road.

Under the previous Biden presidential administration, SEC Chair Gary Gensler took a starkly different approach to regulating the crypto industry than current SEC Chair Paul Atkins. Gensler asserted that most cryptocurrencies were securities and brought several major enforcement cases against big players in the space over concerns of failing to register, while also bringing fraud-related lawsuits.

Ripple’s Litigation Context

In 2020, the SEC sued Ripple and accused it of raising $1.3 billion through the sale of XRP, which it said was an unregistered security. The case was brought under the first Trump administration when Jay Clayton led the SEC, but continued on during Gensler’s tenure.

A New York judge later ruled that some of Ripple’s sales, called programmatic, did not violate securities laws because of a blind bid process in place for them. She did, however, rule that other direct sales of the token to institutional investors were securities. In all, the judge ruled that XRP was not in itself a security, depending on how it is sold.

Garlinghouse stated: “That’s clarity for XRP, but I think for the industry to really move forward in the United States, you need something like the Clarity Act to make it clear about other digital assets as not being securities.” He added: “Hopefully the trend line has moved far enough that we don’t go back no matter what, but codifying it into law means you kind of can’t go back now.”