In a significant move within the cryptocurrency investment landscape, four prominent asset management firms—WisdomTree, Bitwise, 21Shares, and Canary—have recently filed applications with the U.S. Securities and Exchange Commission (SEC) to launch spot XRP exchange-traded funds (ETFs). These filings, submitted via 19b-4 forms through the Cboe Exchange, aim to secure approval for rule changes that would permit the listing and trading of shares tied directly to XRP, the digital asset associated with Ripple Labs.
This wave of applications follows the SEC's earlier approvals of spot Bitcoin and Ethereum ETFs in early 2024, signaling a growing interest among asset managers to expand cryptocurrency offerings to investors. However, unlike Bitcoin and Ethereum, XRP's regulatory status remains complex and unresolved. Ripple Labs has been embroiled in a legal battle with the SEC, which is currently appealing a ruling that determined programmatic sales of XRP to retail investors did not constitute investment contract offerings.
In their filings, the asset managers reference the July 2023 SEC v. Ripple Labs ruling, asserting that XRP does not meet the legal definition of a security. They argue that, based on applicable legal precedents, particularly the aforementioned case, XRP should not be classified as a security under federal law.
A notable challenge for these applications is the absence of a CME futures market for XRP, a factor that has historically been a prerequisite for SEC approval of cryptocurrency ETFs. To address this, the applicants propose alternative measures, including the use of on-chain analytics, enhanced price monitoring, and comprehensive market surveillance, to ensure market integrity and investor protection.
The SEC's decisions on these applications are anticipated to set significant precedents for future cryptocurrency ETF proposals. Approval could pave the way for increased institutional investment in XRP, while rejection may prompt further debate over the regulatory framework governing digital assets.
As the regulatory landscape continues to evolve, stakeholders within the cryptocurrency community are closely monitoring the SEC's forthcoming decisions, recognizing their potential to shape the future of digital asset investment products.
Author
Surabh Yadav
