For retail buyers trading on public cryptocurrency exchanges, XRP is treated as a commodity rather than a security. That has been the working answer since July 2023, when a federal court in the Southern District of New York ruled that Ripple’s sales of XRP to the public through exchange order books were not securities transactions. In August 2025 the SEC and Ripple dismissed their cross-appeals, so whether XRP is a security or a commodity now has a settled practical answer for the token itself, even though no appellate court weighed in on the reasoning.
The Short Answer Depends on How XRP Is Sold
The most important thing to understand about XRP’s legal status is that the 2023 ruling did not label the token itself. It labeled transactions. Judge Analisa Torres looked at how Ripple distributed XRP and reached different conclusions for different channels:
- Direct sales to hedge funds and institutional buyers under written contracts were unregistered securities offerings.
- Anonymous sales on public exchanges to retail buyers were not securities offerings.
- Distributions to employees and developers as compensation were not securities at all, because no one invested money.
So the answer to “security or commodity” turns on which transaction you are asking about. If you are an individual who buys XRP through Coinbase or Kraken, you are on the commodity side of that line. If a company were reselling large blocks of XRP to institutions under investment contracts, the analysis would look different.
What the 2023 Ripple Decision Actually Said
The court applied the Supreme Court’s Howey test, which asks whether buyers invested money in a common enterprise with a reasonable expectation of profits from the efforts of others.1Legal Information Institute. Howey Test
For institutional sales, Ripple sold roughly $728.9 million in XRP directly to sophisticated buyers who understood their money would fund Ripple’s development of the XRP ecosystem. Those buyers expected returns tied to Ripple’s success, and the court found every element of Howey satisfied.2United States District Court Southern District of New York. SEC vs Ripple 7-13-23
For programmatic sales on public exchanges, the court found the opposite. Retail buyers purchased XRP through anonymous order books without knowing the seller’s identity and without receiving marketing materials or promises from Ripple. The record did not establish that these buyers had a reasonable expectation of profits derived from Ripple’s efforts, so Howey was not satisfied.2United States District Court Southern District of New York. SEC vs Ripple 7-13-23
The court expressly declined to rule on whether resales of XRP by third parties on the secondary market would qualify as investment contracts, noting that question “would depend on the totality of circumstances and the economic reality of that specific contract, transaction, or scheme.”2United States District Court Southern District of New York. SEC vs Ripple 7-13-23
Why the 2025 Settlement Made This the Final Word
After the 2023 ruling, the district court entered a final judgment ordering Ripple to pay a $125,035,150 civil penalty and imposing a permanent injunction against future violations of Section 5 of the Securities Act.3U.S. Securities and Exchange Commission. Ripple Labs, Inc., Bradley Garlinghouse, and Christian A. Larsen Both sides appealed to the Second Circuit.
On August 7, 2025, the SEC and Ripple filed a joint stipulation dismissing both appeals, with each side bearing its own costs.4U.S. Securities and Exchange Commission. Joint Stipulation of Dismissal – Appeal Nos. 24-2648 and 24-2705 Over $75 million held in escrow was returned to Ripple, the permanent injunction was vacated, and Ripple’s net payment came out to roughly $50 million.5U.S. Securities and Exchange Commission. Statement on the Agency’s Settlement with Ripple Labs, Inc.
For XRP holders, the practical takeaway is straightforward. The trial court’s distinction between institutional and retail sales is the controlling outcome in this case, and no appeals court will revisit it. Retail exchange sales of XRP by Ripple are not securities offerings.
How Far the Ripple Ruling Reaches
The 2023 decision was a trial-level ruling in one federal district. Because the appeal was dismissed rather than decided on the merits, no appellate court has endorsed or rejected the programmatic-sales reasoning. Other judges in the same courthouse have declined to follow it. In SEC v. Terraform Labs, the court found that the Howey test could apply equally to secondary market transactions and refused to carve out exchange-based sales. A judge in the SEC’s case against Coinbase reached a similar conclusion.
The programmatic-sales framework is influential but not binding beyond the Ripple case. If the SEC brought a similar claim against a different token issuer, another court could reach the opposite result. What is settled is XRP specifically: for that token, in that case, the retail-sales-are-not-securities holding stands.
How the CFTC Treats XRP
The Commodity Exchange Act defines “commodity” broadly enough to reach digital assets. Under 7 U.S.C. ยง 1a(9), the definition covers physical goods and then sweeps in “all other goods and articles” plus “all services, rights, and interests” in which futures contracts are traded.6Office of the Law Revision Counsel. 7 USC 1a – Definitions The CFTC has listed XRP alongside Bitcoin and Ether for derivative event contracts, treating the token as within its jurisdiction for derivatives purposes.
The CFTC’s authority over spot-market XRP trading is limited to enforcement against fraud and market manipulation. It does not register or regulate crypto exchanges the way the SEC oversees stock exchanges.7CFTC. Digital Asset Frauds Proposed legislation, including a bill referred to the Senate Banking Committee in 2025, would expand the CFTC’s role to include registering and regulating digital asset spot markets and requiring disclosure of fees and conflicts of interest.8U.S. Congress. Digital Asset Market Clarity Act of 2025 – 119th Congress If Congress passes it, XRP would fall inside a formal commodity-token regime.
How the IRS Treats XRP Regardless of the Answer
The security-versus-commodity question does not change your tax obligations. The IRS treats all digital assets, including XRP, as property.9Internal Revenue Service. Digital Assets When you sell, trade, or spend XRP, you owe tax on the gain, measured as the difference between what you received and what you paid for the token.
Holding period drives the rate:
- If you held for one year or less, the gain is taxed at ordinary income rates, which range from 10% to 37% for 2026.
- If you held for more than one year, the gain is taxed at long-term rates of 0%, 15%, or 20%, depending on income. For 2026, single filers pay 0% on long-term gains up to $49,450 in taxable income and 15% up to $545,500.10Internal Revenue Service. Revenue Procedure 2025-32
XRP received as payment for goods or services is taxed as ordinary income at the fair market value on the day you receive it.9Internal Revenue Service. Digital Assets
For transactions on or after January 1, 2025, crypto brokers must report your sales to the IRS on Form 1099-DA. Starting January 1, 2026, brokers must also report your cost basis for covered transactions.11Internal Revenue Service. Frequently Asked Questions About Broker Reporting You should receive these forms from any exchange where you traded XRP during the year. Even if a form does not arrive, you still have to report the gains and losses yourself.