Galaxy Digital Head of Research

Mila October 2, 2024

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Key Takeaways

The SEC’s appeal in the Ripple case could derail the approval of an XRP ETF.
Investor interest in XRP ETFs hinges on SEC’s regulatory decisions.

Bitwise’s XRP ETF bid is unlikely to succeed if the SEC appeals the Ripple ruling, which determined that XRP sales on secondary markets to retail investors were not securities, according to Alex Thorn, Head of Research at Galaxy Digital.

The deadline for the SEC to appeal the ruling in its case against Ripple is set for October 7, 2024. As the date approaches, speculation is rife about whether the agency will proceed with an appeal.

“[The] SEC has until next week (Oct. 7) to appeal Judge Torres’ July 2023 ruling (which held that secondary sales of XRP through exchanges were not securities),” Thorn said. “[The] likelihood of this ETF filing succeeding drops to near zero if they do appeal.”

According to FOX Business journalist Eleanor Terrett, a former SEC lawyer said the SEC would “probably” challenge the court ruling as “everyone over there [at the SEC] truly believes that the decision is wrong, that it’s not good law, and should be appealed.”

The SEC has expressed dissatisfaction with the ruling, labeling it “wrongly decided” in a filing as part of its case against Terraform Labs. The agency states the court’s decision creates an unjust distinction between institutional and retail investors.

Should the SEC proceed with an appeal, it is expected to extend the litigation into 2025. However, if the SEC does not challenge the court ruling, Ripple could have finalized its legal battle after paying penalties.

Commenting on Thorn’s statement, Bloomberg ETF analyst Eric Balchunas said XRP ETFs would face dismissal if Kamala Harris wins the White House.

Near zero if Harris wins I agree. Trump victory and anything is poss on this front IMO.

— Eric Balchunas (@EricBalchunas) October 1, 2024

However, an outright rejection may not be justified as how Harris’ administration would handle crypto regulations remains uncertain.

Harris has publicly expressed support for emerging technologies, including crypto, showing a willingness to foster innovation while also protecting consumers. Ripple co-founder Chris Larsen is among prominent industry figures that have expressed endorsement for Harris.

“I suppose if the SEC appeals but Harris wins, there’s a possibility [the] SEC eventually withdraws the appeal,” Thorn added. “Still I’ll be shocked if they don’t appeal before next Tuesday.”