The ongoing settlement negotiations between Ripple and the US Securities and Exchange Commission (SEC) regarding the classification of XRP have taken an interesting turn. Reports suggest that the SEC is now considering whether XRP should be classified as a commodity rather than a security, drawing comparisons to Ethereum (ETH).
Journalist Charles Gasparino highlighted the similarities between XRP and Ethereum, pointing out that both cryptocurrencies were initially issued to finance the development of their respective platforms. Despite Ethereum’s initial issuance through an ICO, the SEC currently views it as a commodity. This has raised questions about why Ripple was sued while Ethereum was not.
The SEC’s evaluation of XRP’s trading utility and market function will play a crucial role in determining the outcome of the lawsuit against Ripple. The commission’s assessment could potentially lead to a settlement between the two parties.
The SEC filed a lawsuit against Ripple in December 2020, alleging that the company conducted an unregistered securities offering through the sale of XRP. However, a significant ruling in August 2023 by US District Judge Analisa Torres differentiated between Ripple’s institutional and retail sales. While institutional sales were deemed to violate securities laws, secondary market sales to retail investors were not considered unregistered securities offerings.
Recent reports indicate that the settlement discussions between Ripple and the SEC are nearing completion, with a focus on aligning the terms with evolving regulatory perspectives on cryptocurrencies. Ripple’s legal team is seeking reduced penalties, arguing that the settlement terms should reflect the SEC’s changing stance on crypto enforcement.
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 penalty. However, Ripple may not find this outcome favorable if it plans to pursue future exempt securities offerings or an initial public offering.
The SEC’s deliberations on the classification of XRP could have far-reaching implications for other cryptocurrencies facing regulatory scrutiny, such as Solana and Cardano. If XRP is deemed a commodity, it could set a precedent for how other digital assets are regulated in the future.
Overall, the ongoing discussions between Ripple and the SEC underscore the complexities of crypto regulation and the need for a nuanced approach to governing this rapidly evolving industry.