The U.S. Securities and Exchange Commission (SEC) is weighing labeling XRP as a commodity in settlement negotiations with Ripple Labs. The move is important in the court case that started in December 2020, when the SEC sued Ripple for selling unregistered securities. Redefining XRP, if it happens, can drastically change the direction of the suit and with broader implications for the cryptocurrency world.
One key component of the settlement negotiations is Ripple's attorneys bargaining over modifications to an initial court order that consisted of a $125 million penalty and institutional selling prohibitions on XRP. The bargaining seeks to harmonize with new policy changes at the SEC under new leadership. SEC is drawing comparisons between Ethereum and XRP, with the former being used as a perfect reference point because it is being viewed as a commodity despite having conducted its first ICO.
If XRP were finally ruled to be a commodity, it might set the stage for the listing of XRP spot Exchange-Traded Funds (ETFs) and might set a precedent for other cryptocurrencies wanting to dismantle regulatory obstacles. The decision in this case is certain to have meaningful long-term consequences on the regulatory landscape for digital assets in the United States.