Election outcome and SEC appeal to decide XRP ETF future

By admin On Oct 4, 2024

With spot crypto ETFs gaining momentum, many expect the upcoming US election to influence their approval.

The Securities and Exchange Commission’s recent appeal of the court ruling in its case against Ripple Labs could also hinder those types of funds getting the regulatory green light.

Investment firm Bitwise on Tuesday filed for an ETF that would hold Ripple (XRP) directly. Canary Capital appeared to file for a similar product, according to the Delaware corporation website.

The digital asset that powers the XRP Ledger public blockchain, XRP helps facilitate cross-border payments and remittances, Bitwise mentioned in a Tuesday press release. XRP’s market capitalization of roughly $33 billion means it ranks seventh among crypto tokens.

“Bitwise, well known for its crypto expertise, will likely launch this product in the future,” said Neena Mishra, director of ETF research at Zacks Investment Research. “Politics will determine whether this happens soon or in a few years.”

Mishra argued that Bitwise is prepping the product in case Donald Trump wins the presidency. The Republican nominee noted in July that he would, if elected, fire SEC Chair Gary Gensler.

“If Harris wins and Gensler remains SEC chair, the filing has no chance of approval, despite her recent comments about supporting digital assets,” Mishra told Blockworks.

Mishra’s thoughts are similar to those expressed by VanEck’s Matthew Sigel after his firm filed for a solana ETF in June. He had noted that filing was essentially a bet on a Trump victory in November.

Sigel did not want to comment on the latest Bitwise S-1, noting only: “We like SOL a lot more than XRP.”

SEC appeal as potential hurdle

Bitwise’s filing came just before the SEC decided to appeal Judge Analisa Torres’s decision in its case against Ripple Labs.

Torres ruled last year that while Ripple’s institutional sales of XRP counted as an unregistered securities offering, programmatic sales did not. Then, in August, the court ordered Ripple to pay a $125 million penalty — far below the $2 billion the SEC had sought.

While we know the SEC has 240 days to approve or deny the Bitwise XRP ETF from the date it publishes the plans in the federal register, the timeline around the steps following the regulator’s appeal remain unclear.

Either way, industry watchers have signaled the agency’s action would delay clarity on XRP’s status, possibly impacting planned ETFs that hold the asset.

Alex Thorn, head of research at Galaxy Digital noted in a Tuesday X post that the likelihood of Bitwise’s XRP ETF “succeeding” would drop to “near zero” if the SEC chose to appeal.

Bitwise’s planned XRP ETF is the latest planned US fund that would hold a crypto asset directly.

Spot bitcoin and ether ETFs hit US exchanges in January and July, respectively. VanEck and 21Shares have also revealed plans to launch spot solana funds.

Some segment observers previously told Blockworks that spot crypto ETF approvals by the SEC — outside of BTC and ETH — might be tough given the precedent of the regulator wanting to first see a regulated futures market. None exist for XRP or solana.

But the plans laid out from Bitwise and Canary seem to advance the growing perception that the US crypto regulatory winds are changing.

While Bitwise declined to comment on that, a Canary Capital spokesperson said there are “encouraging signs of a more flexible regulatory environment.”

The representative added: “This year’s approval of the spot Ethereum ETFs, following the earlier spot bitcoin ETF approvals, signals positive momentum, especially considering how long it took for ETH futures products to be approved. We’re optimistic about the next phase of developments in the space.”

A modified version of this article first appeared in yesterday’s Forward Guidance newsletter. Subscribe here so you don’t miss tomorrow’s edition.

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