SEC considers classifying XRP as commodity in settlement talks with Ripple

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The SEC is considering classifying XRP as a commodity in its ongoing settlement talks with Ripple Labs, FOX Business senior correspondent Charles Gasparino reported today.

SCOOP: Off of @EleanorTerrett‘s scoop from yesterday on the @Ripple – @SECGov settlement negotiations, one issue that is being weighed by the commission is whether $XRP continues to trade and have a utility that makes it more a commodity and not a security. I am told the…

— Charles Gasparino (@CGasparino) March 13, 2025

Gasparino said that 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. 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 reporter, Ethereum’s regulatory treatment has emerged as a key comparison point, as both XRP and ETH were initially used to fund blockchain network development.

Ripple previously clarified that it did not conduct an ICO for XRP. Ripple’s CTO, David Schwartz, and other officials insisted that XRP was pre-mined and distributed differently from typical ICO models.

Ripple’s distribution model has been a point of contention, as it differs from decentralized cryptocurrency launches and has drawn scrutiny from regulators like the SEC, which accuses Ripple of selling unregistered securities.

Neither Ripple nor the SEC has provided public comments on the latest developments in the settlement discussions.

XRP was ruled non-security

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. However, the court found that Ripple’s direct sales of XRP to institutional investors constituted unregistered securities offerings.

Whether a digital token is considered a security is presently determined by its conformity to the Howey Test’s investment contract requirements.

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. Distributions of XRP as compensation or payment for services were also ruled not to constitute securities transactions.

SEC vs. Ripple lawsuit nears conclusion

FOX Business 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.

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 said that ongoing discussions focus on adapting the terms to reflect recent shifts in SEC policies under its new leadership.

Regulatory clarity is key to crypto ETF approvals

In a January interview with Blockworks, 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.

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