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XRP’s ‘Legal Clarity’ Comes with a Caveat – Financial Institutions Remain Concerned About Torres’ Classification of Institutional Sales
Half a year after the SEC officially concluded its pursuit against Ripple, a contradiction has emerged: U.S. institutions are actively shedding direct XRP exposure while simultaneously preparing for the ETF launch.
As of this writing, XRP was priced at $1.22, significantly lower than its July 2025 high of $3.65.
Xrp (XRP)24h7d30d1yAll time
Despite the “legal clarity” celebrated in August, institutional confidence seems divided. While Bitwise and WisdomTree revised their S-1 filings in October—boosting approval probabilities to nearly 95%—institutional Futures Open Interest (OI) has plummeted 73% since the settlement.
The Evidence
The Settlement: The August 2025 Joint Stipulation concluded with a $125 million penalty for past institutional sales. Furthermore, the SEC withdrew its appeals, solidifying the 2023 summary judgment that public sales do not qualify as securities.
The Divergence:
- ETF Flows: Grayscale’s conversion filing for GXRP (Nov 2025) and Bitwise’s Amendment No. 4 suggest imminent approval.
- Direct Flows: On-chain data indicates a $405,000 net outflow from institutional wallets in just the last 24 hours.
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Reaction & Outlook
The Paul Atkins Factor: The new SEC Chair’s “Project Crypto” initiative has deprioritized enforcement, yet banks remain immobilized by the specific language of Judge Torres’ ruling: direct sales to institutions are classified as securities.
BREAKING:
SEC LAUNCHES PROJECT CRYPTO TO MOVE ALL MARKETS ONCHAIN. pic.twitter.com/BNRqB2M6hE— Crypto Rover (@cryptorover) July 31, 2025
BREAKING:Next Step: The market is anticipating a spot ETF approval by Q2 2026. Until that occurs, liquidity remains limited.
The Institutional Take
Do not misinterpret the futures decline as a sign of bearish sentiment; it represents a compliance rotation. The Torres ruling has established a problematic asset class for U.S. banks: holding XRP directly on a balance sheet still carries the stigma of “institutional sales.”
The ETF serves as the workaround. It encapsulates the “tainted” underlying asset within a “clean” securities framework (19b-4). Savvy investors are offloading the token to preemptively position for the ETF, effectively exchanging compliance risk for a 34bps management fee. Anticipate OI to remain stagnant until the ETF is launched.
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