Bitwise XRP ETF Approval Is Uncertain as SEC Files Notice of Appeal

Investment asset management Bitwise chose to pursue an XRP ETF product at a very odd time. The firm recently filed an S-1 registration with the United States Securities and Exchange Commission (SEC).

Investment asset management firm Bitwise recently filed an S-1 registration with the United States Securities and Exchange Commission (SEC) to launch an exchange-traded fund (ETF) product tracking the performance of XRP. This move by the San Francisco-based firm has sparked speculations among experts regarding the future of this filing and the potential impact of the ongoing legal battle between the SEC and Ripple Labs Inc.

Last year, Judge Analisa Torres ruled in the Ripple vs SEC case that XRP is not a security under the Howey Test. This decision granted Ripple a partial victory in the lawsuit, as the SEC had sought to classify XRP as a security and block its sale. However, the regulator also secured a win with Judge Torres ruling that Ripple violated securities laws by selling XRP to institutional investors without registering it with the SEC.

For this violation, Ripple was ordered to pay a $125 million penalty in the SEC lawsuit two months ago. Initially, both parties did not signal any intent to appeal the verdict, but experts anticipated that either party could still file an appeal.

The window for an appeal was kept open but scheduled to expire on October 7, 2024. However, on October 2, the SEC filed a Notice of Appeal to challenge the court's ruling on XRP's securities status. This filing has set the stage for further legal clashes and could impact various aspects, including Bitwise's XRP ETF ambitions.

In the long run, if the SEC's appeal is successful in arguing that XRP is a security, Bitwise may have to reconsider its XRP ETF plans. This is because the SEC, under Gary Gensler's leadership, has maintained that cryptocurrencies, except for Bitcoin and Ethereum, should be classified as securities.

This stance could make it difficult for ETFs tracking non-commodity crypto assets to secure approval from the regulator. On the other hand, if XRP is deemed a commodity, its ETF approval chances are higher.

Appeals Court Commentary on Past US SEC Cases

A post by Ripple CLO Stuart Alderoty on LegalΞagle's commentary suggests that Bitwise may not have to worry about the SEC winning the appeal. The Ripple executive seems to be very confident that SEC might face another legal defeat at the Court of Appeals.

He took to Twitter to share some of the responses that the regulator has received from the court in the past.

Alderoty highlighted the SEC's appeal in its case with Aron Govil of Jacksonville, Florida, where the court stated, "We do not agree with the SEC," "We are not persuaded" by the SEC's arguments and "The SEC's counterarguments are unavailing."

Attorney Fred Rispoli thinks it will be a long wait for the XRP ETF, but he also thinks it will go the same way Grayscale BTC ETF applications ended. This means that no matter how long the delay lasts, the SEC will eventually approve the offering.

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