- The US SEC is contemplating classifying XRP as a commodity amid ongoing settlement discussions with Ripple Labs.
- Recent reports suggest that the regulatory status of Ethereum continues to be a primary reference for the litigation’s outcome regarding XRP.
- In July 2023, US District Judge Analisa Torres ruled that XRP is not inherently classified as a security.
The US Securities and Exchange Commission (SEC) is evaluating the possibility of designating XRP as a commodity during its settlement negotiations with Ripple Labs.
SEC Considers XRP Commodity Classification in Talks with Ripple
The SEC is weighing the idea of classifying XRP as a commodity as part of its ongoing discussions with Ripple Labs. According to a report by a correspondent, the US securities regulators are using Ether as a benchmark to formulate their case for either categorizing XRP as a commodity or keeping its current classification.
In light of this development, XRP’s price climbed beyond the $2.34 threshold, witnessing a 23% increase over the past week.
This indicates that, despite the predominantly negative sentiment in the broader cryptocurrency markets, the positive news concerning XRP is helping to mitigate rapid short-term declines.
Settlement Outcome and XRP Spot ETF Approvals Linked to Ethereum Reference
Even though Ethereum initially raised funds through an Initial Coin Offering (ICO), the SEC now regards it as a “pure commodity.”
Reports state that Ethereum’s regulatory stance is a critical point of reference since both XRP and ETH were initially sold to fund the development of their projects.
In a January interview, an ETF analyst discussed the hurdles faced by Solana ETFs, including the SEC’s classification of Solana as a security and the ongoing lawsuits, which complicate the approval process for a commodities ETF wrapper.
The analyst noted that the SEC often seeks clarity and the resolution of legal disputes before finalizing decisions on financial products tied to assets with uncertain regulatory standings.
While XRP wasn’t specifically mentioned, the parallels indicate that regulatory clarity is crucial for approval.
The SEC’s lawsuit against Ripple concerning XRP’s classification as a security has posed a significant barrier to any XRP ETF applications.
Unless the SEC’s lawsuit against Ripple is resolved, it seems unlikely that any XRP ETFs will gain approval.
If the SEC’s position on XRP shifts, potentially leading to reclassification, it would significantly impact Ripple’s ongoing legal situation and enhance the chances of spot XRP ETF approvals.
XRP Declared Non-Security in July 2023
In a pivotal ruling in July 2023, US District Judge Analisa Torres concluded that XRP is not inherently a security, especially when traded on secondary markets.
Significantly, this decision clarified that XRP transactions via exchanges do not constitute securities offerings, as buyers had no direct relationship with Ripple and were unaware of the company’s involvement.
SEC vs. Ripple Lawsuit Approaching Resolution
A journalist recently reported that the legal conflict between the SEC and Ripple is nearing a conclusion, with both parties working toward a resolution.
“The argument suggests that if the new SEC leadership is clearing the enforcement slate for all previously targeted crypto firms because they believe regulatory clarity will fix the underlying issues, why should Ripple still be penalized?
Acknowledging the Torres ruling as it stands would imply that Ripple is admitting to wrongdoing, yet the SEC itself now seems uncertain about any wrongdoing.”
– Journalist
Ripple’s legal team is reportedly negotiating modifications to the ruling, which included a $125 million fine and limitations on selling XRP to institutional investors. Discussions are also focusing on adjusting the terms to align with recent changes in SEC policies under new leadership.