The SEC is reportedly considering reclassifying the XRP token as a commodity, a move that follows prior comparisons to Ethereum, which was reclassified in the past.

This potential reclassification is being closely monitored by the cryptocurrency community, as it could have significant implications for Ripple and the broader market.

If XRP is classified as a commodity, Ripple may face reduced regulatory constraints, while maintaining its status as a security could lead to further legal challenges.

The ongoing delay in resolving Ripple's case is partly due to the legal team's negotiations for better terms after a $125 million fine and restrictions on institutional XRP sales from a district court ruling in August 2023.

Eleanor Terrett from Fox Business pointed out that Ripple's argument questions the fairness of penalties if the SEC's new leadership is easing enforcement on other crypto firms.

Ripple's legal team is advocating for reduced penalties, arguing that an admission of wrongdoing contradicts the SEC's changing stance on crypto enforcement.

In July 2023, Judge Analisa Torres ruled that Ripple's programmatic XRP sales did not violate securities laws, while institutional sales were classified as securities.

In a sign of growing optimism in the crypto industry, Franklin Templeton has filed for a spot XRP ETF, influenced by the Trump administration's policies.

The SEC's new approach is further evidenced by Vermont's recent withdrawal of its case against Coinbase, which may set a beneficial precedent for Ripple.

Attorney James Murphy suggested that the SEC might favor a settlement to expedite the resolution, although this could jeopardize Ripple's future plans for exempt securities offerings or an IPO.

Ripple faces a deadline of April 16, 2025, to file its appellant brief, as the SEC's evaluation of XRP's classification has become increasingly complex.

The SEC's potential reclassification of XRP could lead to less stringent regulations, positively impacting its market value and paving the way for the approval of XRP ETFs.