The U.S. Securities and Exchange Commission (SEC) announced on June 17, 2025, that it has officially initiated proceedings to evaluate a proposed rule change by Cboe BZX Exchange Inc. regarding the listing and trading of an exchange-traded fund (ETF) called the Franklin XRP ETF. This development comes after the SEC previously extended the review timeline on April 29, and it now opens a formal public comment period to determine whether the proposal meets regulatory standards.
Key Details of the Proposal
The Franklin XRP ETF, managed by Franklin Holdings LLC, aims to track the price performance of XRP, before expenses. Coinbase Custody Trust Company LLC will serve as the custodian for the XRP holdings, while daily valuation will be based on the CME CF XRP-Dollar Reference Rate – New York Variant. Shares can be created or redeemed in cash or in-kind, with a minimum creation unit of 50,000 shares. According to the filing, the fund's assets will consist solely of XRP, cash, and cash equivalents, ensuring alignment with its investment objective.
SEC's Regulatory Concerns
The SEC’s notice highlights concerns under Section 6(b)(5) of the Securities Exchange Act of 1934, which requires rules that effectively prevent fraudulent and manipulative acts and protect investors. The Commission specifically solicited feedback on whether the proposed product raises any new or novel concerns not previously addressed in prior ETF approvals. This formal review process grants interested parties 21 days to submit written comments, followed by a 35-day rebuttal period.
The SEC’s decision to open formal proceedings reflects a cautious but open approach to crypto-backed ETFs. Following the approval of spot Bitcoin and Ethereum ETFs in 2024 and 2025 respectively, several applicants have filed for XRP ETFs, including Bitwise, Grayscale, and 21Shares. The Franklin XRP ETF is the first to reach this stage of formal review, which analysts view as a positive sign for XRP’s regulatory status.
Market Impact and Outlook
Following the announcement, XRP’s price rose approximately 5% within 24 hours, indicating market optimism. The potential approval of a spot XRP ETF would provide mainstream investors with a regulated vehicle to gain exposure to XRP, potentially driving significant institutional inflows. However, lingering legal uncertainties from the SEC’s ongoing lawsuit against Ripple Labs could still pose risks. In July 2023, a federal court ruled that XRP is not a security when sold to retail investors on exchanges, but the SEC has appealed part of that ruling. The outcome of the Franklin ETF review could further clarify the legal landscape for XRP.
In summary, the SEC’s formal review marks a pivotal moment for XRP’s integration into traditional finance. The next few weeks will determine whether the Franklin XRP ETF clears the regulatory hurdle, potentially paving the way for other XRP ETF applications.