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Is XRP's security status protected by Section 105 of the CLARITY Act?

The security concerns surrounding XRP have once again become a focal point in U.S. cryptocurrency policy debates, with supporters pointing to Section 105 of the latest draft of the CLARITY Act and suggesting that this provision could strengthen the legal standing of secondary market sales of XRP.

After focusing on pages 110 to 112 of the account referencing draft concerning XRP, the debate has intensified. These accounts argue that Section 105 contains language related to previous court rulings. Their view is that if a court has already ruled before the bill takes effect that a particular digital asset transaction is not a security, then that transaction should not be reclassified as a security under the same framework.

XRP supporters immediately linked this language to the ruling by Judge Analisa Torres in 2023, which determined that secondary market transactions of XRP are not securities transactions. They believe that if the bill passes in its current form, Section 105 could provide federal legal protection for this part of the Ripple case.

This claim is currently still related to the legislative draft, not enacted law. The CLARITY Act still needs to go through committee review, withstand amendments, pass the Senate, and may require coordination with other legislation before it can become law.

Section 105 Reignites the Spotlight on XRP’s Security Status

Section 105 has garnered attention because it introduces a decentralization test and language regarding “network tokens.” XRP supporters argue that XRP fits this category because the XRP ledger operates independently of Ripple and is used for payments, settlements, and utility transactions.

Supporters’ argument is that the value of XRP is linked to network usage rather than directly to Ripple’s profits. They also state that even if Ripple is not directly involved, the XRP ledger will continue to operate, which they believe supports the argument that XRP should be distinguished from securities issued by the company.

Critics may still question this interpretation. The wording of the draft requires legal interpretation, and regulators can still scrutinize specific transactions, issuer behaviors, or market activities based on the final wording of the bill.

For XRP holders, the key question is whether the CLARITY Act can reduce the risk of future actions by the U.S. Securities and Exchange Commission (SEC) over secondary market trading. Supporters believe that Section 105 might help prevent future government or SEC chairpersons from reinitiating the same securities classification disputes.

Ripple Executives Support Progress of the CLARITY Act

Ripple CEO Brad Garlinghouse praised the Senate Banking Committee for supporting the advancement of the CLARITY Act and stated that millions of Americans have already participated in the cryptocurrency market. He said Ripple supports the bill because cryptocurrency users should enjoy rules and protections similar to other asset classes.

Ripple General Counsel Stuart Alderoty also cited the “2026 Cryptocurrency Holder Status Report” published by the U.S. National Cryptocurrency Association, which states that 67 million Americans currently hold cryptocurrencies. The report shows California has the highest number of crypto holders at 9.5 million, followed by Texas with 5.94 million and Florida with 4.71 million.

Ripple supports the bill because the company and its XRP remain closely connected to the broader U.S. digital asset regulatory framework. Clearer rules around token classification, exchange regulation, and market structure could impact XRP, Solana, Litecoin, Hedera, Dogecoin, Chainlink, and other major tokens.

The review process by the Senate Banking Committee is expected to attract close attention from crypto companies, banks, investors, and policy groups.

Senator Warren’s Amendment Adds New Uncertainty

Senator Elizabeth Warren has submitted, according to reports cited by cryptocurrency market observers, over 40 amendments to the CLARITY Act. One such amendment reportedly aims to remove what supporters call the “grandfather clause,” which could affect tokens that have already been litigated or have established transaction status.

Warren believes the bill threatens investors, national security, and the financial system. She also criticized the bill for lacking conflict-of-interest provisions related to President Donald Trump and his family’s cryptocurrency investments.

Another amendment proposed by Warren would prevent the Federal Reserve from granting master accounts to cryptocurrency firms. Companies involved include Ripple, Anchorage Digital, Circle, and Custodia Bank, with reports indicating that K has already obtained a master account with the Fed.

Additionally, proposals from Democratic Senators Jack Reed and Tina Smith involve restrictions on stablecoin yields and the use of cryptocurrencies like Bitcoin and XRP for tax payments.