US SEC may declare XRP a 'commodity' as Ripple settlement talks begins

The US Securities and Exchange Commission (SEC) is considering classifying XRP as a commodity in its ongoing settlement talks with Ripple Labs. 

SEC Weighs XRP commodity classification in settlement talks with Ripple

The SEC is considering classifying XRP as a commodity in its ongoing settlement talks with Ripple Labs. According to FOX correspondent Charles Gasparino, the US securities regulators are using Ether as a benchmark in order to build a case for either classifying XRP as a commodity or maintaining its current classification. 

Ripple (XRP) Price Action 

In reaction to the development, XRP’s price surged past the $2.34 mark, gaining 23% in the past seven days.

This signals that despite negative sentiment dominating the broader crypto markets, bullish news surrounding XRP is providing a buffer against rapid short-term dips.

Settlement verdict and XRP spot ETF approvals hinging on Ethereum reference

Ethereum, despite its initial fundraising through an Initial Coin Offering (ICO), is now considered by the SEC to trade as a “pure commodity.”

According to the reports Ethereum’s regulatory treatment has emerged as a critical reference point, as both XRP and ETH were initially sold to fund initial development of the projects.]

In a January interview, Bloomberg ETF analyst James Seyffart discussed the challenges facing Solana ETFs, including the SEC’s classification of Solana as a security and ongoing lawsuits, which complicate the approval process for a commodities ETF wrapper.

According to Seyffart, the SEC typically seeks clarity and resolution of legal disputes before making a decision on financial products related to assets with uncertain regulatory status.

While not specifically mentioning XRP, the situation is similar in that regulatory clarity is crucial for approval.

The SEC’s lawsuit against Ripple over XRP’s status as a security has been a major hurdle for any XRP ETF filing.

Until the SEC’s lawsuit against Ripple is resolved, it is unlikely that any XRP ETFs will be approved.

If the SEC’s stance on XRP changes, potentially resulting in reclassification, it would not only affect Ripple’s ongoing legal case but also considerably increase the likelihood of spot XRP ETF approvals.

XRP was ruled non-security in July 2023

In a landmark ruling in July 2023, US District Judge Analisa Torres determined that XRP is not inherently a security, particularly when traded on secondary markets.

Notably, the 2023 decision clarified that XRP sales through exchanges do not qualify as securities offerings since buyers had no direct relationship with Ripple and were unaware of the company’s involvement. 

SEC vs. Ripple lawsuit nearing conclusion

FOX journalist Eleanor Terrett reported Wednesday that the legal battle between the SEC and Ripple is nearing a conclusion, as the two parties are working toward a resolution.

“The argument, I’m told, is that if the new SEC leadership is wiping the enforcement slate clean for all previously-targeted crypto firms because it believes regulatory clarity will resolve the underlying issue, why should Ripple still be penalized?

Accepting the Torres ruling as it stands would mean that Ripple is essentially agreeing to admit to wrongdoing — but now the SEC itself is seemingly unsure whether any wrongdoing occurred.”

- Eleanor Terret

Ripple’s legal team is reportedly negotiating adjustments to the ruling, which imposed a $125 million fine and restrictions on selling XRP to institutional investors.
Terrett also said that ongoing discussions focus on adapting the terms to reflect recent shifts in SEC policies under its new leadership.