- The Teucrium XRP ETF launched after the SEC let a statutory deadline pass without making a decision.
- This passive approval only works for futures-based ETFs under the 1940 Act.
The Teucrium XRP ETF began trading without the direct approval of the U.S. Securities and Exchange Commission. The fund came into effect when a statutory deadline was allowed to lapse without the regulatory agency making a decision.
This has given rise to extensive debate among cryptocurrency investors and legal practitioners regarding the regulatory framework for investing in digital asset products.
Analyst Chad highlighted the outlier approval process on the social media platform X. He observed that the silence by the SEC was more or less approving the launching of the fund. The regulator neither approved nor disapproved the filing within the stipulated time. This is a passive strategy, which is contrasted with the active approval process that many market players anticipated.
How the Teucrium XRP ETF Structure Works
The structure of the fund demonstrates the reason why it might become operational without direct SEC approval. The Teucrium XRP ETF does not store XRP tokens; it holds U.S. Treasuries, cash, and swap receivables. It is run by the Investment Company Act of 1940. This registration route involves the SEC taking a course of action within a given time, or the filing becomes effective automatically.
Journalist Eleanor Terrett provided clarification on regulatory differences. She added that futures-based ETFs use this same approval mechanism. The 1940 Act framework is particularly applicable to the funds that invest in derivatives and traditional securities instead of possessing direct ownership of cryptocurrency.
Adding some context here for those asking if this applies to all ETFs, including the spots.
The short answer is no. The Teucrium $XRP ETF holds Treasuries, cash, and swap receivables, so it was registered under the 40 Act, meaning the @SECGov didn’t need to actively approve it,… https://t.co/H8EiXVcOHp
— Eleanor Terrett (@EleanorTerrett) October 3, 2025
This is unlike spot crypto ETFs. Such products contain real digital assets and have to be registered as commodity trusts under the Securities Act of 1933. That registration route must have special SEC approval before one can start trading. The agency should be proactive in signing off on such filings.
Spot ETFs Face Different Regulatory Path
The introduction of the Teucrium XRP ETF does not set a precedent for spot cryptocurrency ETFs. Proposed spot ETFs for XRP, Litecoin, Solana, and other digital currencies will not be allowed without direct regulatory approval. These applications have to be reviewed by the SEC and formal approvals issued.
The difference is relevant to the overall crypto ETF market. There are various other spot crypto ETFs of assets that are not Bitcoin and Ethereum that several asset managers have submitted. These products are awaiting decisions by the SEC that may take months. Compared to the futures-based products, the regulatory agency scrutinizes the spot ETF proposals more rigorously.
Attorney Bill Morgan, a pro-XRP legal analyst, raised timing issues. He claimed that the current U.S. government shutdown is likely to postpone some ETF decisions. Not every SEC activity is based on congressional appropriations, however. The Division of Corporation Finance handles ETF filings and continues to process applications.
Morgan proposed that approval decisions can still be made during late October. The impact of the government shutdown on SEC operations depends on its duration. Long-term closures might delay the regulation timelines of various applications pending approval.
As highlighted in our previous article, the approval process for a Litecoin exchange-traded fund hit a roadblock due to the US government shutdown, as the SEC is operating with a reduced staff.
