Cboe Files for Spot XRP ETFs Amid Regulatory Scrutiny

The Chicago Board Options Exchange (Cboe) has taken a significant step toward introducing spot XRP exchange-traded funds (ETFs) in the United States.

On February 6, Cboe filed four separate 19b-4 applications with the U.S. Securities and Exchange Commission (SEC) on behalf of WisdomTree, Bitwise, 21Shares, and Canary.

These filings mark a crucial milestone in the regulatory approval process and could potentially position XRP alongside Bitcoin and Ethereum as the next major cryptocurrency to gain ETF status.

The Significance of XRP ETF Filings

The submitted applications follow prior S-1 filings from the issuers, moving these investment products closer to regulatory review. Once the SEC acknowledges receipt of these filings, the agency has a maximum of 240 days to either approve or reject the proposals.

Ripple CEO Brad Garlinghouse hinted at an impending decision by the SEC, posting a clock emoji on social media. He has long maintained that an XRP ETF is inevitable, reinforcing the expectation that such financial products will eventually be approved.

Ripple has emphasized that the wave of ETF applications from multiple issuers highlights growing institutional interest in XRP-related investment products.

If approved, these ETFs will allow investors to gain exposure to XRP’s price movements without requiring fund managers to directly buy or hold the asset.

Legal and Regulatory Context

A key argument in Cboe’s filings is rooted in Ripple Labs' partial legal victory in July 2023. The ruling determined that programmatic sales of XRP to retail investors did not constitute investment contracts under federal law. However, this decision remains under appeal, with the SEC seeking to reverse the ruling in the Second Circuit Court.

Cboe asserts that XRP does not qualify as a security under federal law and argues that the absence of a futures market should not hinder ETF approval. The SEC previously approved Bitcoin and Ethereum ETFs despite their CME futures markets not being classified as "significant in size.”

The exchange contends that alternative mechanisms exist to prevent fraud and market manipulation, making a surveillance-sharing agreement unnecessary for XRP ETFs.

Read Also: XRP ETF Approval — Could It Be Just Two Months Away?

Structural and Security Features of XRP ETFs

The proposed XRP ETFs will track the price of XRP while incorporating various investor protection measures. Unlike Bitcoin and Ethereum ETFs, which are backed by CME futures contracts, XRP lacks an established futures market.

To mitigate regulatory concerns, asset managers have outlined several safeguards, including:

1. Diverse Sourcing: XRP tokens will be acquired from secondary markets rather than Ripple Labs.

2. Enhanced Market Surveillance: Real-time monitoring will help detect and prevent potential manipulation.

3. Third-Party Custody Solutions: Licensed custodians will securely hold XRP assets.

4. Cold Storage for Security: The majority of XRP holdings will be kept in offline storage to reduce counterparty risks.

5. Trading Halt Mechanisms: The ETFs will include mechanisms to suspend trading during periods of extreme market volatility to protect retail investors.

These security measures are consistent with approaches taken in previous crypto ETF filings, such as the recent Solana ETF proposal, which was resubmitted after regulatory feedback.

Market Impact and Investor Sentiment

The prospect of XRP ETFs has fueled optimism among investors, even as XRP's price has faced downward pressure. The cryptocurrency, which is the fourth-largest by market capitalization, saw its value decline by approximately 33% after nearly reaching its all-time high of $3.40 in January 2024.

Following the Cboe filings, XRP continued to trade below its peak, with price fluctuations influenced by ongoing regulatory uncertainties and macroeconomic factors.

Fox Business correspondent Eleanor Terrett cautioned that the submission of these filings does not guarantee approval, highlighting the extensive regulatory scrutiny they will undergo. The SEC has the authority to extend the review process multiple times, potentially delaying a final decision for up to 240 days.

Other XRP ETF Developments

Cboe is not the only exchange seeking XRP ETF approval. NYSE Arca recently applied to convert Grayscale’s XRP Trust into an ETF, further signaling institutional interest in the asset.

Moreover, the SEC has begun acknowledging ETF filings for cryptocurrencies previously deemed securities, such as Solana and Litecoin. Bloomberg Intelligence ETF analyst Eric Balchunas noted that this shift in the SEC’s stance is "notable" and could pave the way for further crypto ETF approvals shortly.

Read Also: XRP ETFs: A Game-Changer for Crypto in 2025

Conclusion

The race to launch the first spot XRP ETF in the U.S. is intensifying, with leading asset managers making significant regulatory strides. The outcome of the SEC’s review will not only impact XRP’s market trajectory but also set a precedent for the approval of ETFs tied to other digital assets.

As the regulatory process unfolds, investors and industry stakeholders will closely watch how the SEC navigates the legal complexities surrounding XRP’s classification and the broader implications for the cryptocurrency sector.

FAQ

1. What is a spot XRP ETF?
A spot XRP ETF is an exchange-traded fund that directly tracks the price of XRP, allowing investors to gain exposure to its price movements without needing to buy or hold the cryptocurrency themselves.

2. Who filed for the XRP ETFs?
The Chicago Board Options Exchange (Cboe) filed four separate 19b-4 applications with the U.S. Securities and Exchange Commission (SEC) on behalf of asset managers WisdomTree, Bitwise, 21Shares, and Canary.

3. Why is this filing significant?
This marks a key step in bringing XRP ETFs to the U.S. market. If approved, XRP could join Bitcoin and Ethereum as a major cryptocurrency with an ETF product, potentially increasing institutional investment in XRP.

4. What is the SEC's review process for XRP ETFs?
Once the SEC acknowledges receipt of the filings, it has up to 240 days to approve or reject the proposals. The agency can also extend the review process multiple times.

5. What legal factors influence the approval of an XRP ETF?
Cboe’s filings reference Ripple Labs' partial legal victory in July 2023, where a court ruled that programmatic sales of XRP to retail investors were not securities. However, the SEC is appealing this decision, which could impact the ETF approval process.

6. Does XRP have a futures market like Bitcoin and Ethereum?
No, XRP does not currently have an established futures market. Cboe argues that this should not prevent ETF approval, citing alternative mechanisms to ensure market integrity.