According to recent rumors, the SEC is considering reclassifying the XRP token as a commodity. The commission seems to be comparing XRP to ETH, which has been reclassified in the past.
Today, Vermont regulators cited the SEC's new Crypto Task Force as a reason to withdraw the lawsuit against Coinbase. In 2022, the state's financial regulators argued that the staking service violated securities laws, but they no longer hold this view. This change could help set a precedent for Ripple.
Ripple and the SEC continue to discuss
The SEC's lawsuit against Ripple is a very hot issue in the cryptocurrency community, and for good reason. Under Gary Gensler, the Commission has declared that XRP is an unlicensed security and has tried to block all sales transactions.
Yesterday, there were rumors that the lawsuit could soon be resolved and Ripple is trying to negotiate far-reaching changes. A new perspective may have emerged:
"One issue the Commission is considering is whether XRP continues to trade and have utility that makes it more like a commodity than a security. The Ethereum example is important; ETH was clearly issued as an ICO... no different than XRP, but Ripple was sued while Ethereum was not because ETH has become a commodity," Charles Gasparino stated.
Such a proposal would be a significant change to US cryptocurrency regulation, but it could happen for several reasons. First, Commissioner Hester Peirce has stated that the SEC may stop considering some assets as securities, and has reclassified meme coins.
The Commission is also planning a new collaboration with the CFTC, the highest commodity regulator in the US.
The post-Gensler SEC has laid important groundwork for the reclassification of XRP. If Ripple and the SEC can agree, XRP will be subject to much less stringent regulations, which will almost certainly have a positive impact on its market value.
XRP has much in common with Ethereum
If the SEC withdraws the lawsuit against XRP, this altcoin could be evaluated primarily based on its decentralized functionality and utility in the respective networks rather than as investment contracts - similar to how Ethereum has been evaluated.
This change will emphasize the role of XRP in supporting real-time transactions on its network, making its characteristics more akin to a commodity.
Technically, this would be easy to assess, as Ripple has always provided payment infrastructure for some global banks and payment services.
Additionally, the SEC may point to other legal efforts to establish precedents for the Ripple case. In 2022, Vermont and some other US states sued Coinbase, arguing that its staking service violated securities laws. Today, Coinbase's Chief Legal Officer announced that Vermont had withdrawn the allegations, citing the SEC's new model:
"The SEC has announced the formation of a new Crypto Task Force to, among other things, provide guidance on the development of rules related to the regulation of crypto products and services. In light of... the potential for new federal regulatory guidance, the [Division] will withdraw the pending Order to Show Cause, without prejudice," the dismissal order from Vermont stated.
In other words, a state has declared that the Commission's new guidance has invalidated their previous arguments. If the SEC decides that it has been overly harsh with Ripple in the past, it has the right to reclassify XRP.
Finally, if XRP is classified as a commodity after April 16, this will immediately increase or even confirm the possibility of approving an ETF for XRP. Overall, this scenario would be very positive for the third-largest altcoin.
