WisdomTree’s spot XRP ETF proposal enters SEC review process

The US Securities and Exchange Commission (SEC) has officially started reviewing the WisdomTree XRP ETF proposal. It is the first US spot XRP ETF proposal that would allow investors to invest in XRP.

The SEC will also consider whether the XRP ETF proposal offers adequate investor protection and has methods to prevent market manipulation.

SEC begins reviewing the WisdomTree XRP ETF proposal

Earlier, Cboe BZX Exchange submitted this application. If approved, it will be the first spot XRP ETF in the United States, potentially paving the way for similar products related to other cryptocurrencies and expanding the ecosystem.

The proposed ETF aims to track XRP’s market price using the CME CF Ripple-Dollar Reference Rate. This would greatly benefit investors, enabling them to access XRP through regular brokerage accounts without needing private keys or self-storage. 

The SEC gave crypto investors new hope for these benefits with their recent Release No. 34-103124 announcement. 

The notice from the commission says it will begin a thorough review of the application. The Commission has 240 days to determine whether to grant or deny the request.

To get the review process for the proposal started, the agency began asking the public to give its input on whether or not the ETF’s approach is adequate to address potential market manipulation and to protect investors.

This week, Ripple’s Chief Legal Officer, Stuart Alderoty, participated in this evaluation. Alderoty wrote a letter to the regulator’s crypto group outlining his opinion that XRP shouldn’t be classified as a security on its own.

Commissioner Hester Maria Peirce raised a crucial question concerning his opinion in her “New Paradigm” speech. She asked, “When does a digital asset become separate from an investment contract?”

Alderoty submitted another letter to the agency’s Crypto Task Force responding to the question, claiming that rules must be clear not just for issuers but also for all market players who might unknowingly be labeled as securities exchanges, brokers, dealers, or issuers. He further stated that relying too much on unclear terms like fully functional or decentralized only causes more confusion instead of providing clarity. 

SEC’s recent action has sparked hope among other ETF firms

In the wake of Trump’s pro-crypto position, companies in the US like Grayscale, WisdomTree, and Bitwise have filed applications with the SEC. The watchdog acknowledged a few XRP spot ETF filings, suggesting it is processing their submissions.

However, the SEC later delayed its review process—a move anticipated by Bloomberg analyst James Seyffart, who projected a decision might come by October. After the regulator gave the green light for WisdomTree, Grayscale, and Bitwise are optimistic that they are next in line for approval.

Meanwhile, Ripple Labs—the company responsible for developing and promoting XRP—has agreed to settle its legal dispute with the SEC. The settlement ends the legal battle over whether XRP is a financial security. Ripple had agreed to a fine of $50 million, down from the $125 million penalty proposed in August.

Min Jung, a research analyst for Presto Research, said that with the settlement, an XRP ETF is likely to get the green light. If any new spot ETFs were to be approved after Bitcoin and Ethereum, XRP or Solana could be suitable candidates. However, Jung also noted that the demand for spot XRP ETFs remain unknown. 

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