The regulatory endgame of XRP: How do the triple legal moats complete the closed loop before the CLARITY Act?

In May 2026, the U.S. Senate Banking Committee passed the highly anticipated “CLARITY Act” by a vote of 15 to 9, adding another piece to the crypto legislative process. Amid the discussions surrounding this bill, one widely repeated judgment is that XRP’s regulatory fate will depend on whether the bill ultimately takes effect. That judgment has some context, but it is not entirely accurate.

As of May 2026, XRP has established its legal status through three independent and mutually supporting pathways: judicial rulgments from federal courts, the SEC’s own enforcement finality, and a formal regulatory classification framework jointly issued by the SEC and CFTC. These three events form XRP’s “dual regulatory moat.” Although the passage of the CLARITY Act will provide a more macro institutional framework for the entire industry, for XRP specifically, its core compliance issues have already been resolved before the legislative process was completed.

This is the logic foundation for Ripple CEO Brad Garlinghouse’s public statement in May 2026 that “XRP already has regulatory clarity.”

The Basic Structure of the Dual Moat

Before expanding the analysis, it is necessary to clarify one core fact: as of May 25, 2026, XRP’s compliance status is jointly constituted by two regulatory barriers that have already been finalized.

The first barrier comes from the judicial system. In July 2023, U.S. federal district judge Analisa Torres issued a ruling determining that XRP’s conduct of programmatic sales to the public on exchanges does not constitute a securities offering. This precedent, known as the “Torres Principle,” remains a binding legal authority to this day and has not been overturned by any appellate court.

The second barrier comes from the administrative enforcement system. In August 2025, the SEC and Ripple jointly withdrew their respective appeals, marking the official end of a lawsuit that had lasted nearly five years. On March 17, 2026, the SEC and CFTC jointly issued a 68-page formal interpretive guidance, explicitly classifying XRP as a “digital commodity.” This framework is not legislation, but it is a formal, commission-level interpretive statement jointly issued by two major federal regulators, and it carries direct enforcement guidance effectiveness.

The existence of these two barriers means that even if the CLARITY Act’s legislative process is delayed or its content is adjusted, XRP’s current legal position will not be shaken.

Campaign One: The Torres Ruling — The Cornerstone Decision of the Judicial System

Time: July 2023 — Present

In July 2023, in the SEC v. Ripple Labs case, U.S. federal district court judge Analisa Torres of the Southern District of New York issued a landmark, watershed decision. She ruled that Ripple’s programmatic sales of XRP to the public through exchanges do not constitute securities offerings, while Ripple’s direct sales to institutional investors constitute securities transactions. The core of this ruling lies in distinguishing the elements of an “investment contract”—secondary market buyers did not establish any direct relationship with Ripple based on an expectation of profits.

In August 2025, the SEC and Ripple jointly filed a stipulation of dismissal. The civil penalty ultimately paid by Ripple in the amount of $125 million was deposited with the U.S. Department of the Treasury, including $50 million paid to the SEC and the remainder of approximately $75 million returned to Ripple. The penalty amount initially requested by the SEC was $2 billion. The court confirmed that $125 million was a “reasonable deterrent penalty.” At the same time, the court vacated the injunction against Ripple’s institutional sales. The case was fully closed.

The Torres ruling created two enduring, continuously effective precedents within the legal system. First, XRP itself is not a security—this conclusion holds in the context of programmatic sales. Second, its legal characterization requires distinguishing the method of sale and the relationship between the buyer and the issuer, rather than treating the token itself categorically. This “transaction scenario-based” analytical approach is called the Torres Principle, and it has been substantively adopted in subsequent regulatory frameworks.

In early 2025, Judge Torres rejected a revised settlement proposal of $50 million. This rejection did not deny the possibility of settlement, but showed that the court required the final proposal to be based on a full adjudication of the core legal disputes, rather than avoiding substantive issues through partial compromise.

As for the outcome, the $125 million penalty is only 6.25% of the approximately $2 billion penalty amount originally demanded by the SEC, and it comes without any restrictions on XRP’s secondary market trading. This is a rare result across the SEC’s entire crypto enforcement history.

Campaign Two: SEC Case Closure — A Substantive Shift in the Enforcement System

Time: August 2025 — Present

In August 2025, the SEC and Ripple completed their joint withdrawal. Since then, the SEC’s overall enforcement strategy in the crypto space has shown measurable changes.

A report released in April 2026 shows that the number of SEC crypto enforcement actions declined by 22% year over year in fiscal year 2025. The agency explicitly announced that its focus will shift to “fraud only”—that is, concentrating resources on directly targeting fraudulent conduct rather than pursuing issuers under registration-violation theories.

This shift has two substantive implications for XRP. First, the SEC is no longer seeking to overturn the Torres ruling or initiate new challenges to XRP’s status in similar cases; the redeployment of enforcement resources means the case will not be reopened in any form. Second, the formal establishment of the “fraud only” strategy releases a broader signal— the SEC recognizes that a “regulation through enforcement” model is difficult to sustain and unlikely to form stable market expectations in the absence of legislative authorization.

The downward trend in SEC crypto enforcement actions is not an isolated phenomenon; it is closely related to the establishment of the SEC’s crypto special working group in 2025 and the launch of the “Project Crypto” initiative. Regulators are shifting from a passive posture of responding to developments to an active governance stance of proactively formulating classification rules. For XRP, this shift directly locks in a factual conclusion: the litigation is now history, and similar types of enforcement risk will not re-emerge.

Campaign Three: CFTC Commodity Designation — Formal Confirmation of the Classification Framework

Time: March 17, 2026 — Present

On March 17, 2026, the SEC and CFTC jointly issued an official interpretive guidance titled “Application of Federal Securities Laws to Certain Crypto Assets and Related Transactions.” This 68-page document divides crypto assets into five categories: digital commodities, digital collectibles, digital tools, stablecoins, and digital securities. XRP, together with a total of 16 crypto assets including Bitcoin, Ethereum, Solana, and others, is listed in the “digital commodities” category.

According to the document, the definition of a digital commodity is an asset intrinsically linked to a functional cryptosystem, whose value comes from the system’s programmatic operation and supply-demand dynamics rather than from the efforts of others under management. After the joint guidance was released, regulatory authority over XRP’s spot market is primarily exercised by the CFTC, and the “securities” label was officially removed.

The effectiveness hierarchy of the guidance needs to be understood precisely. It is a formal interpretive release issued by federal regulatory agencies at the commission level, with a legal status as an “Interpretive Release.” It does not modify the Howey test, nor does it replace federal securities law. Instead, for the first time, it systematically explains how the SEC and CFTC classify and regulate crypto assets under the existing legal framework. The document also explicitly states that it supersedes all prior statements issued by SEC staff on the relevant topics.

Removing the “securities” label has specific legal consequences. Previously, compliance departments at major financial institutions generally regarded XRP as a high-risk asset and were concerned about assisting in the sale of unregistered securities. Commodity classification shifts compliance burdens from securities registration standards to commodity declaration standards, which are a framework that is easier to operate within the traditional financial system. This clears substantial legal obstacles for XRP to be re-listed on U.S. exchanges, for institutional custody services to be launched, and for approvals of standardized products such as spot ETFs.

It is worth noting that this framework is not law, but it represents the SEC and CFTC’s joint formal position on regulatory jurisdiction over crypto assets. In the absence of direct legislation, the very form of this joint issuance is an important signal—it indicates that the two major federal regulators have reached a consensus on XRP’s classification, and no longer need to rely on Congress to answer this fundamental question.

What the CLARITY Act Means for XRP: An Increment, Not a Prerequisite

After clarifying the legal implications of the three campaigns, the answer to the question “Does XRP need the CLARITY Act?” is now clear.

The CLARITY Act’s legislative goal is to establish an official legal framework for the U.S. digital asset market and delineate regulatory jurisdiction between the SEC and the CFTC. The bill was formally introduced in the House of Representatives on May 29, 2025, through bipartisan cooperation, and passed in the House on July 17 of the same year with 294 votes in favor and 134 against. On May 14, 2026, the Senate Banking Committee advanced it to the full Senate for consideration by a vote of 15 to 9.

However, as of May 25, 2026, in the full Senate, the bill faces more than 100 amendments, with several controversial provisions related to DeFi regulation and stablecoin yield. The bill still needs to pass the Senate by a 60-vote majority and be reconciled with the House version before being sent to the President for signature.

For XRP, the value of the CLARITY Act is that it provides a more stable long-term institutional framework at the institutional level, but it is not a constituting element of XRP’s compliance status. XRP’s commodity identity has been confirmed by the joint SEC and CFTC framework, the legality of its secondary market trading has been established by federal court rulings, and its legal dispute with the SEC has been concluded. The passage of the CLARITY Act will provide legal confirmation of these completed steps, but even if the legislative process is delayed or the bill’s content is adjusted, XRP’s existing legal status will not collapse.

The CLARITY Act can be understood as a “unified code” for the entire crypto industry, while XRP has already completed “pre-compliance” at the case-by-case level. Garlinghouse’s remarks in May 2026—“XRP has clarity”—accurately express this logic.

Structural Decoupling Between Regulatory Progress and Price Movements

When evaluating the impact of regulatory events on XRP’s price, it is necessary to distinguish between “event-driven short-term volatility” and “systemic changes in structural risk premiums.”

After the joint framework was released in March 2026, XRP’s price did not experience a sharp, impulse-like rally. In fact, at that time the broader crypto market was constrained by macroeconomic variables (such as Federal Reserve interest rate expectations), limiting the price transmission effect of any single regulatory event.

But what deserves attention is structural change rather than short-term price fluctuations. The Torres ruling declared a unique legal landscape—“litigation is no longer an effective explanatory variable for XRP’s price movements.” Over the past five years, litigation uncertainty has been a persistent factor suppressing XRP’s valuation. Removing this factor is an irreversible structural event. XRP’s valuation drivers are shifting from “the outcomes of regulatory contests” to “network utility and the rate of institutional adoption.” Although this transition will not be reflected in daily percentage changes in a concentrated way, its significance for reshaping long-term value anchors is profound.

As of May 25, 2026, according to Gate market data, XRP is quoted at approximately $1.35, with a total market capitalization of about $83.46 billion and a 24-hour trading volume of about $8.0275 million. XRP’s market share is 4.99%.

Over the past 90 days, XRP’s trading range has been $1.27 to $1.61; over the past 30 days, $1.30 to $1.55; and over the past 7 days, $1.30 to $1.40. Over the past year, XRP has experienced a significant drop from a peak of about $3.66 to its current level, with an approximately -42.46% year-over-year change. Price action shows a structural pattern of narrowing volatility and gradually lifting the bottom.

Market expectations around XRP spot ETFs have always been one of the key focuses for institutions. After the CFTC’s commodity designation took effect, the regulatory foundation for approving XRP spot ETFs has significantly improved. However, the final listing of ETF products still depends on the issuers’ application pacing and how the approval process proceeds in practice.

Conclusion

As of May 2026, XRP’s compliance foundations are already built on three mutually independent and mutually reinforcing lines of defense: federal court judgments establish XRP’s non-securities status in the secondary market; the conclusion of the SEC v. Ripple dispute eliminates the risk of enforcement hanging overhead; and the joint classification framework by the SEC and CFTC formally categorizes it as a digital commodity at the administrative level. While these three lines of defense have different levels of legal authority and stability, together they form a complete protective system.

Undoubtedly, the CLARITY Act’s legislative process will affect the institutional environment for the entire U.S. crypto industry. But XRP does not need to wait for this bill to complete its compliance story. The core chapters of this story—judicial recognition, enforcement finality, and administrative classification—have already been turned. Next, what will be written is a new chapter in institutional adoption and validation of network value.