The Securities and Exchange Commission (SEC) has taken a critical step forward by setting a timeline for determining whether it will approve an exchange-traded fund (ETF) that tracks the price of XRP, a key cryptocurrency. This development is particularly noteworthy given the ongoing legal challenges faced by Ripple, the issuer of XRP.
Recently, the SEC acknowledged a 19b-4 filing submitted by the New York Stock Exchange (NYSE) along with asset manager Grayscale. This marks a significant milestone as it is the first time the SEC has responded to a filing related to XRP. Following this acknowledgement, the Commission now has up to 240 days to arrive at a decision regarding the ETF proposal.
While the SEC has previously considered various applications for crypto-focused ETFs—including those for Solana (SOL), Litecoin (LTC), and Dogecoin (DOGE)—this particular acknowledgment bears added significance in light of the SEC’s ongoing lawsuit against Ripple. The Commission initiated legal action against Ripple in December 2020, accusing the company of violating U.S. securities laws by selling XRP as an unregistered security to generate funds.
In a major development for Ripple, a federal judge ruled in August 2023 that XRP is not a security when sold in secondary markets, a decision that partially favored Ripple in this high-profile court case. However, the SEC has not backed down and filed an appeal on January 15, citing that Ripple’s distribution of XRP meets the criteria laid out by the Howey Test, a significant legal standard for determining whether a transaction qualifies as an investment contract under U.S. law.
Nate Geraci, President of the ETF Store, has spoken on the implications of the SEC’s decision to entertain the filing, stating, “They could have easily rejected this filing. Enormous message [in my opinion].” This remark underscores the potential shift in attitudes towards XRP as a legitimate asset.
Bloomberg ETF analysts James Seyffart and Eric Balchunas have weighed in on the likelihood of an XRP ETF gaining approval, estimating a 65% chance that such an ETF could be sanctioned by the end of 2025. Comparatively, their forecast places an even higher probability on the approval of an LTC ETF at 90%, followed by a DOGE ETF at 75%, and an SOL ETF also at 65%.
Overall, the ETF applications currently under consideration—regarding various digital assets—are set to receive decisions as early as October. How the SEC ultimately handles the XRP ETF filing may set a crucial precedent for the broader cryptocurrency landscape, particularly in how regulatory bodies approach digital asset classifications in the future.
