The recent appeal by the U.S. Securities and Exchange Commission (SEC) in its ongoing case against Ripple Labs Inc. has cast a shadow of uncertainty over the potential launch of the Bitwise XRP ETF. As Bitwise seeks to establish an exchange-traded fund based on XRP, this regulatory development raises critical questions about the future of XRP and the viability of the ETF.
Background on the Ripple Case
About a year ago, Judge Analisa Torres ruled that XRP is not classified as a security, marking a significant victory for Ripple. However, the judge also determined that Ripple violated securities laws by selling XRP to institutional investors without proper registration. Consequently, Ripple was fined $125 million for these violations.
Initially, both the SEC and Ripple did not indicate intentions to appeal the ruling. However, as the deadline for filing an appeal approached—set to expire on October 7, 2024—the SEC submitted a Notice of Appeal on October 2, challenging the court’s classification of XRP. This move has created a complex landscape for Bitwise and its XRP ETF ambitions.
Uncertainty Surrounding Bitwise XRP ETF
With the SEC’s recent filing, there is growing speculation that the agency might block Bitwise’s application for an XRP ETF. If the appeal favors the SEC and XRP is determined to be a security, Bitwise may be forced to abandon its ETF pursuit. Historically, investment products backed by securities face stricter regulatory scrutiny, whereas commodities like Bitcoin have seen more favorable treatment in terms of ETF approvals.
Perspectives from Legal Experts
Despite the uncertainty, some legal experts express optimism regarding the potential outcomes of the appeal. Stuart Alderoty, Chief Legal Officer at Ripple, believes that the SEC may face significant challenges in court, citing past cases where the courts have disagreed with the SEC’s positions. Alderoty highlighted instances where courts stated, “We do not agree with the SEC,” and characterized the SEC’s counterarguments as unconvincing.
Attorney Fred Rispoli suggests that while the timeline for the XRP ETF approval might be prolonged, the outcome may ultimately mirror that of Grayscale’s BTC ETF applications, which faced delays but were eventually approved by the SEC.
Conclusion
The SEC’s recent appeal in the Ripple case introduces considerable uncertainty for Bitwise’s XRP ETF application. If the appeal is successful and XRP is designated a security, the implications for Bitwise could be severe. However, perspectives from legal experts hint that the SEC may encounter significant hurdles in court, potentially allowing for a favorable outcome for XRP. As the situation develops, investors and market participants will need to closely monitor the legal proceedings and their implications for the cryptocurrency landscape.
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