The Securities and Exchange Commission (SEC) is reportedly considering whether XRP qualifies as a product rather than security for its continued settlement negotiations with Ripple.
According to journalist Charles Gasparino, the SEC is weighing the similarities between XRP and Ethereum (ETH). The agency's current administration reportedly views Ethereum as a commodity despite the initial issuance by the First Coin Supply (ICO).
Gaspatino I said:
“ETH was clearly issued as an ICO. Its characteristics of issuance were not different from XRP. Both were used to fund the platform's build-out, but Ripple was sued and Ethereum was transformed into a product. What is currently being discussed is a comparison between the two ciphers.”
The Committee's assessment of XRP's trading utilities and market functions may be important in determining the final terms of the case against Ripple, and could lead to a potential settlement.
The SEC lawsuit filed in December 2020 against Ripple allegedly enforced securities not provided through the sale of XRP.
However, in August 2023, US District Judge Annalisa Torres issued a pivotal ruling that distinguished Ripple's institutional sales and retail sales. The court held that institutional sales of XRP constituted an investment agreement and thus violated the securities law, but that secondary market sales to retail investors are not eligible to be an unregistered securities provider.
As a result, the ruling fined Ripple $125 million and issued a permanent injunction restricting institutional sales of XRP.
Potential settlement
Recent reports suggest that this case is in it Final stage of resolutionwith discussions focused on ensuring terms that reflect the evolving regulatory perspective on cryptography.
Ripple's legal team is said to be driving a reduction in penalties, claiming there is implicit recognition of a misconduct dispute with the SEC's changing stance on Crypto's enforcement.
We argue that if the SEC is reconsidering the regulatory classification of digital assets, the terms of the settlement should be consistent with this evolving framework.
Attorney James Murphy, known as Metalawman, suggested that the SEC had withdrawn the appeal and accepted a settlement to collect a $125 million penalty “in a heartbeat.”
However, this outcome may not be beneficial to Ripple, particularly if the company intends to pursue future exemption securities or initial public offerings.
The SEC's deliberations regarding the classification of XRP reflect the broader uncertainty in cryptographic regulations. If an institution recognizes XRP as a product, it can set precedents for other cryptography that are facing regulatory scrutiny, such as Solana (SOL) and Cardano (ADA).
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