On U.S. cryptocurrency exchanges, XRP is treated as a commodity for retail buying and selling, not as a security. That answer comes from a 2023 federal court ruling in SEC v. Ripple Labs and became the final word on the case when the SEC and Ripple jointly dismissed their appeals in August 2025. The question of whether XRP is a security or a commodity has no single federal classification, but for the ordinary person opening an exchange account and buying tokens, the controlling legal result is that those trades are not securities transactions.
Why the Answer Depends on How XRP Is Sold
The central idea from the Ripple case is that the token itself is neither a security nor a commodity in the abstract. What matters is the economic reality of the specific transaction. The same XRP token can be part of a securities offering when sold one way and a non-security commodity trade when sold another.
That is why the headlines after the 2023 ruling looked contradictory. Judge Analisa Torres of the Southern District of New York found that Ripple had conducted an unregistered securities offering through some of its sales and had not through others. The distinction was the buyer and the manner of sale, not the asset.
What the 2023 Ripple Ruling Decided
The court sorted Ripple’s XRP distributions into three categories and applied the Supreme Court’s Howey test to each.1United States District Court Southern District of New York. SEC vs Ripple 7-13-23
Direct Institutional Sales Were Securities
Ripple sold roughly $728.9 million in XRP directly to hedge funds, institutional buyers, and on-demand liquidity customers under written contracts. Those buyers knew their money would fund Ripple’s development of the XRP ecosystem and expected profits tied to the company’s success. The court held that all elements of the Howey test were satisfied and that these were unregistered securities offerings.
Programmatic Exchange Sales Were Not
Ripple also sold XRP into public cryptocurrency exchanges through anonymous, algorithmic trading. Retail buyers hit order books without knowing who was on the other side and without receiving marketing materials or promises from Ripple. The court found the record did not establish that these buyers had a reasonable expectation of profits derived from Ripple’s efforts, so the Howey test was not satisfied. A person buying XRP through an exchange order was not entering the same economic arrangement as an institution signing a direct contract with the company.
Employee Pay and Developer Grants Were Not
Ripple distributed XRP as compensation to employees and as grants to third-party developers. Because no one invested money, these distributions failed the first element of Howey and were not securities.
The court was explicit that it was not ruling on whether later secondary market sales by other parties would qualify as investment contracts, saying that question “would depend on the totality of circumstances and the economic reality of that specific contract, transaction, or scheme.”
What the August 2025 Dismissal Changed
After the 2023 summary judgment, the district court entered a final judgment in 2024 imposing a $125,035,150 civil penalty on Ripple and a permanent injunction against future violations of Section 5 of the Securities Act.2U.S. Securities and Exchange Commission. Ripple Labs, Inc., Bradley Garlinghouse, and Christian A. Larsen Both sides appealed.
On August 7, 2025, the SEC and Ripple filed a joint stipulation dismissing both appeals, with each side bearing its own costs.3U.S. Securities and Exchange Commission. Joint Stipulation of Dismissal – Appeal Nos. 24-2648 and 24-2705 More than $75 million held in escrow was returned to Ripple, and the permanent injunction was vacated.4U.S. Securities and Exchange Commission. Statement on the Agency’s Settlement with Ripple Labs, Inc. Ripple paid about $50 million in net penalties and faces no ongoing injunction. For the XRP question, the practical effect is that the 2023 trial court distinction between institutional and programmatic sales is now the final outcome in the case.
How Far the Ripple Precedent Reaches
The Ripple decision was a trial-level ruling in one federal district, and because the appeal was dismissed rather than decided, no appellate court has endorsed or rejected its reasoning. Other judges in the same courthouse have declined to adopt the programmatic-sales distinction. In SEC v. Terraform Labs, the court found 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.
For XRP itself, the dismissal of all appeals means the 2023 ruling controls and retail exchange sales by Ripple are not securities offerings. For other tokens, a different judge weighing a similar fact pattern could rule the other way.
The CFTC Treats XRP as a Commodity
The Commodity Exchange Act defines “commodity” broadly. Under 7 U.S.C. § 1a(9), the term starts with physical items like wheat and livestock and then sweeps in “all other goods and articles” plus “all services, rights, and interests” in which futures contracts are traded.5Office of the Law Revision Counsel. 7 USC 1a – Definitions Courts have read this language to reach digital assets, and a federal court confirmed in 2024 that Bitcoin and Ether qualify.
The CFTC has listed XRP alongside Bitcoin and Ether for purposes of derivative event contracts, treating it as falling within its jurisdiction. On the spot market where you actually buy and sell the token, the CFTC’s authority is enforcement-only: it can bring cases for fraud and manipulation but does not register or regulate exchanges the way the SEC oversees stock exchanges.6CFTC. Digital Asset Frauds
What This Means If You Hold XRP
After the 2023 ruling, U.S. exchanges that had pulled XRP during the SEC lawsuit began restoring trading. Coinbase relisted it the same day, Kraken followed, and the August 2025 appeal dismissal removed the remaining legal uncertainty. XRP is available on most major U.S. cryptocurrency exchanges.
Classification for trading purposes does not change how XRP is taxed. The IRS treats all digital assets, including XRP, as property.7Internal Revenue Service. Digital Assets When you sell or exchange XRP, you owe tax on the gain, calculated as the difference between what you received and what you paid. Hold for one year or less and the gain is taxed at ordinary income rates. Hold for more than one year and it qualifies for long-term capital gains rates of 0%, 15%, or 20% depending on your income. If someone pays you in XRP for goods or services, the fair market value at receipt is taxed as ordinary income.
Reporting rules are also tightening. For transactions on or after January 1, 2025, cryptocurrency brokers must report your sales to the IRS on Form 1099-DA, and starting January 1, 2026, they must also report your cost basis for covered transactions.8Internal Revenue Service. Frequently Asked Questions About Broker Reporting You should receive those forms from any exchange where you traded XRP. Whether a form arrives or not, you are responsible for reporting your gains and losses.
One boundary worth being clear about: the “not a security” result applies to retail exchange trades of XRP. If you are selling large blocks of XRP directly to funds or institutional buyers under written contracts, the Ripple court’s analysis points the other direction, and the arrangement could be treated as a securities offering requiring registration.