Ripple vs. SEC: Key Dispute in Negotiations Comes to Light

• SEC considers whether XRP should be classified as a commodity, drawing comparisons with Ethereum’s regulatory status.
• Ripple pushes for a settlement that reflects the SEC’s evolving stance on crypto regulation and avoids future complications.

The ongoing legal battle between Ripple and the U.S. Securities and Exchange Commission (SEC) has entered a delicate phase. The central issue now revolves around whether XRP can be classified as a commodity or a security. 

As the two parties engage in settlement talks, new details have emerged, highlighting the SEC’s consideration of Ethereum’s (ETH) regulatory status as part of its evaluation of XRP. This issue could influence the future of both Ripple and the crypto market.

According to Charles Gasparino, a senior correspondent at Fox Business, the SEC is currently weighing the similarities and differences between XRP and Ethereum. The agency is comparing the two digital assets, particularly their initial issuance processes.

SCOOP: Off of @EleanorTerrett 's scoop from yesterday on the @Ripple – @SECGov settlement negotiations, one issue that is being weighed by the commission is whether $XRP continues to trade and have a utility that makes it more a commodity and not a security. I am told the…

— Charles Gasparino (@CGasparino) March 13, 2025

Both XRP and Ethereum were used to finance the development of Ethereum platforms through an Initial Coin Offering (ICO) and XRP via a similar method. Despite these similarities, the SEC has considered Ethereum’s current status as a commodity, a classification that could impact how it views XRP.

In his report, Gasparino emphasized that Ethereum’s issuance via an ICO did not differentiate it from XRP at the time. However, as Ethereum evolved, the SEC regarded it as having “morphed” into a commodity. This shift in Ethereum’s classification is at the center of the SEC’s argument in the current negotiations, where Ripple’s legal team is pushing for XRP to be treated similarly.

Ripple’s Legal Challenges with the SEC

Ripple has been involved in a legal dispute with the SEC since 2020, when the commission filed a lawsuit against the company. The SEC alleges that Ripple’s sale of XRP was an unregistered securities offering.

Ripple, in turn, has maintained that XRP should not be classified as a security and has argued that the SEC’s inconsistent treatment of different digital currencies undermines its case.

In a ruling from August 2023, U.S. District Judge Analisa Torres differentiated between Ripple’s institutional and retail sales of XRP. The court ruled that while institutional sales of XRP violated securities laws, secondary market sales to retail investors did not. This ruling resulted in a $125 million penalty for Ripple and restricted institutional XRP sales, though retail sales remained unaffected.

Settlement Possibilities

As we reported in our previous post, the case appears to be nearing its conclusion, with ongoing negotiations centered on finalizing a settlement. Sources suggest that Ripple’s legal team is pressing for more favorable settlement terms, particularly in light of the SEC’s shifting stance on digital asset regulation. Ripple’s argument centers on the notion that the SEC’s shifting views on crypto regulation should influence the final terms of any settlement.

Legal experts, including attorney James Murphy (MetaLawMan), have predicted that the SEC could be inclined to settle the case, accepting the $125 million penalty and dropping appeals. However, such an outcome might not be suitable for Ripple if the company seeks to avoid future complications related to its public offerings.