SEC is reportedly considering XRP’s classification as a commodity during discussions on Ripple settlement
The US Securities and Exchange Commission (SEC) is reportedly exploring whether XRP should be classified as a commodity rather than a security in its ongoing settlement talks with Ripple.
According to journalist Charles Gasparino, the SEC is comparing XRP to Ethereum (ETH) in its assessment. The current administration of the agency views Ethereum as a commodity despite originating from an initial coin offering (ICO).
Gasparino stated:
“ETH was clearly an ICO; its issuance resembled XRP’s – both were used for platform development, yet Ripple faced a lawsuit while Ethereum was considered a commodity. The current discussion involves comparing these two cryptocurrencies.”
The evaluation of XRP’s trading function and market utility by the SEC could play a significant role in determining the outcome of the lawsuit against Ripple and potential settlement terms.
The SEC’s lawsuit against Ripple, filed in December 2020, accused the company of conducting an unregistered securities offering through XRP sales.
However, in August 2023, US District Judge Analisa Torres made a crucial ruling distinguishing between Ripple’s institutional and retail sales. The court found that while institutional sales of XRP violated securities laws, secondary market sales to retail investors did not qualify as unregistered securities offerings.
As a result, Ripple was fined $125 million and regulations were enforced to restrict institutional XRP sales.
Potential settlement
Recent reports suggest that the case is nearing its final resolution, with talks focusing on terms reflecting evolving crypto regulatory perspectives.
Ripple’s legal team is reportedly seeking reduced penalties, arguing that acknowledging wrongdoing conflicts with the SEC’s evolving stance on crypto enforcement. The company believes that if the SEC is reevaluating digital asset regulations, settlement terms should align with this shift.
Attorney James Murphy, also known as MetaLawMan, suggested that the SEC would have readily accepted a settlement to drop appeals and collect the $125 million fine.
However, this may not be in Ripple’s best interest, especially if they plan to pursue exempt securities offerings or an IPO in the future.
The SEC’s examination of XRP’s classification mirrors broader uncertainties in crypto regulation. If XRP is deemed a commodity, it could establish a precedent for other cryptocurrencies facing regulatory scrutiny like Solana (SOL) and Cardano (ADA).
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