S-1/A: Grayscale XRP Trust S-1/A: ETF Listing & Financials

Grayscale XRP Trust files Amendment No. 2 to its S-1 registration, detailing its intent to list as an ETF on NYSE Arca under GXRP, alongside financial performance and significant risk disclosures.

Summary

• Grayscale XRP Trust is a Delaware statutory trust aiming to list as Grayscale XRP Trust ETF on NYSE Arca under symbol GXRP.
• Its objective is for the value of the Shares (based on XRP per Share) to reflect the value of XRP held by the Trust, less expenses and liabilities, without using leverage or derivatives.
• The Trust will issue Shares in Baskets of 10,000 shares, initially through Cash Orders, with in-kind creations/redemptions subject to future regulatory approval.
• Net assets increased to $16,909 thousand as of September 30, 2025, up 62% from $10,450 thousand at December 31, 2024.
• Net realized and unrealized gain on investment in XRP was $3,906 thousand for the nine months ended September 30, 2025.
• The Sponsor's fee is 0.35% annually, waived until NYSE Arca listing or $1 billion in assets under management.
• XRP price appreciated from $2.10 per XRP on December 31, 2024, to $2.86 per XRP on September 30, 2025.

Sentiment

Score: 7

Explanation: The filing presents strong financial performance and positive regulatory developments (SEC dismissals, generic listing standards approval) which are favorable for the Trust's future. However, significant risks remain, particularly regarding the ongoing regulatory uncertainty of XRP's security status and the current inability to conduct in-kind creations/redemptions, which could hinder arbitrage efficiency. While the long-term potential for XRP and the Trust is notable, these unresolved issues warrant a cautious approach.

Positives

• Net assets increased by 62% to $16,909 thousand for the nine months ended September 30, 2025, demonstrating strong growth.
• XRP price appreciated significantly from $2.10 to $2.86 per XRP during the nine months ended September 30, 2025.
• The Trust intends to list on NYSE Arca as an ETF (GXRP), which could enhance liquidity and accessibility for investors.
• The Sponsor has committed to irrevocably abandoning Incidental Rights and IR Virtual Currency, simplifying the trust's structure and tax treatment.
• The Sponsor's annual fee of 0.35% is competitive and is currently waived until NYSE Arca listing or $1 billion AUM.
• Robust security procedures are in place for XRP custody, including cold storage, multiple encrypted private key shards, and geographical distribution of vaults.
• The Trust is designed to provide a cost-effective and convenient way for investors to gain exposure to XRP without direct acquisition and safekeeping complexities.
• The SEC approved new generic listing standards for commodity-based trust shares, which the Sponsor believes the Trust's Shares would qualify for.
• The SEC entered court-approved joint stipulations to dismiss enforcement actions against Binance, Coinbase, and Kraken between February and May 2025, reducing regulatory uncertainty for digital asset trading platforms.

Negatives

• The Trust is currently only able to accept Cash Orders for creations and redemptions, with in-kind transactions subject to future regulatory approval, which could impact arbitrage efficiency and liquidity.
• The SEC has previously taken the view that XRP is a security, and a final determination to that effect could adversely impact XRP's value and potentially lead to the Trust's termination.
• XRP's market price has experienced extreme volatility, with a historical annualized volatility of 82% and a maximum annual price decrease of 82%.
• The digital asset market is largely unregulated and lacks transparency, exposing the Trust to risks of fraud, market manipulation, and business failures on Digital Asset Trading Platforms.
• The fixed supply of 100 billion XRP, combined with burning as transaction fees, could create deflationary pressure and liquidity issues in the distant future.
• Concentrated ownership of XRP by Ripple Labs and other early stakeholders could lead to adverse effects on market price if large sales occur.
• Competition from other digital assets, central bank digital currencies (CBDCs), and Ripple Labs' own solutions that do not require XRP could negatively impact XRP's price.
• The Trust is an emerging growth company, which means reduced disclosure requirements that may make Shares less attractive to some investors.
• Shareholders have limited voting rights and restricted ability to bring derivative actions, requiring at least two unaffiliated shareholders holding 10% of outstanding shares.
• The Custodian's maximum liability is limited, and insurance coverage for digital assets may not be adequate to cover all potential losses.
• Potential conflicts of interest exist between the Sponsor/its affiliates and the Trust, as the Sponsor may favor its own interests.

Risks

• Extreme volatility of XRP trading prices, potentially leading to substantial loss of Share value.
• Uncertain medium-to-long term value of Shares due to the nascent and evolving nature of blockchain technologies and digital assets.
• Dependence of Share value on the acceptance of digital assets like XRP, which is a new and rapidly evolving industry.
• Concentrated ownership of XRP, with large sales by holders potentially adversely affecting market price.
• Recent extreme volatility and disruption in digital asset markets, loss of confidence in ecosystem participants, negative publicity, and market-wide liquidity declines.
• Largely unregulated nature and lack of transparency of Digital Asset Trading Platforms, leading to risks of fraud, market manipulation, business failures, and security failures.
• Shares may trade at a premium or discount to NAV per Share due to non-current trading hours between NYSE Arca and the 24-hour Digital Asset Trading Platform Market.
• Temporary or permanent forks or clones of the XRP Network could adversely affect Share value.
• Lack of active trading markets for Shares may result in losses upon disposition.
• Illiquid markets may exacerbate losses or increase variability between NAV and market price.
• Less liquidity or wider spreads in the market for Shares compared to other spot XRP ETPs, if approved.
• Limited history of the Index used to calculate XRP value.
• Competition from other digital assets, including Bitcoin, Ethereum, Stellar, and central bank digital currencies (CBDCs).
• Liquidity of Shares may be affected if Authorized Participants cease obligations or Liquidity Engager fails to engage Liquidity Providers.
• Suspension or unavailability of the Trust's redemption program may cause Shares to trade at a discount.
• A determination that XRP is a security could adversely affect its value, lead to extraordinary expenses, or terminate the Trust.
• Regulatory changes or actions by U.S. Congress or federal/state agencies may restrict XRP use or network operations.
• Changes in SEC policies could adversely impact Share value.
• Regulatory changes or events in foreign jurisdictions may affect Share value or restrict XRP use.
• Authorized Participants, the Trust, or the Sponsor could be regulated as a money service business or money transmitter, leading to extraordinary expenses and decreased liquidity.
• Regulatory changes or interpretations could obligate the Trust or Sponsor to register and comply with new regulations, resulting in extraordinary expenses.
• Potential conflicts of interest among the Sponsor, its affiliates, and the Trust.
• Discontinuance of Sponsor's services could be detrimental.
• Lack of ability to facilitate in-kind creations and redemptions of Shares could have adverse consequences.
• Custodian's resignation or removal without replacement could trigger early termination.
• Reliance on third-party service providers, with replacement posing challenges to XRP safekeeping and Trust operations.
• No guarantee of an active trading market for Shares.
• Congestion or delay in the XRP Ledger may delay XRP purchases or sales by the Trust.
• Prices of XRP may be affected by stablecoins (Tether, USDC), their activities, and regulatory treatment.
• XRP price may become closely correlated with other asset classes.
• Significant XRP holdings by Ripple Labs and early stakeholders could adversely affect market price.
• Competition from Ripple Labs solutions not requiring XRP, or from consortia/private blockchains.
• Future sales of XRP by Jed McCaleb or other Ripple Labs founders could cause price decline.
• Unanticipated problems with Trust operations or trading mechanics.
• Security threats to the Trust's Vault Balance or Settlement Balance could halt operations and lead to asset loss.
• Irrevocable nature of XRP transactions; stolen or incorrectly transferred XRP may be irretrievable.
• Lack of full insurance and limited shareholder legal recourse against service providers.
• Trust may be required to terminate and liquidate at a disadvantageous time.
• Limited shareholder voting rights and restricted derivative action rights.
• Sponsor's sole responsibility for NAV determination; errors could adversely affect Share value.
• Extraordinary expenses from unanticipated events may be borne by the Trust.
• Tax liability for shareholders without associated distributions from the Trust due to XRP sales for expenses.
• Adverse impact if the Trust is required to indemnify service providers.
• Intellectual property rights claims may adversely affect the Trust.
• Pandemics, epidemics, and disasters could negatively impact holdings and operations.
• Shareholders will not receive benefits of forks or airdrops.
• Trust will not participate in staking programs, potentially disadvantaging Shares.
• Coinbase Global serving as custodian/prime broker for competing products could lead to resource allocation issues.
• Certain Authorized Participants serving competing products could affect arbitrage mechanism.
• Inability of Authorized Participants/market makers to hedge XRP exposure may affect liquidity.
• Arbitrage difficulties due to operational issues could adversely affect investment.
• Uncertain U.S. federal income tax treatment of the Trust and digital assets.
• Future developments in tax treatment could adversely affect Share value.
• U.S. tax-exempt shareholders may recognize unrelated business taxable income (UBTI).
• Non-U.S. Holders may be subject to U.S. federal withholding tax on income from forks/airdrops.

Future Outlook

The Trust intends to list Shares on NYSE Arca under GXRP and operate a redemption program, subject to SEC exemption. The Sponsor expects a net creation of Shares if they trade at a premium to NAV and a net redemption if they trade at a discount, indicating an effective arbitrage mechanism. The Trust may also create and redeem Shares via in-kind transactions in the future, subject to NYSE Arca obtaining In-Kind Regulatory Approval, though there is no assurance as to when this approval will be sought or obtained.

Management Comments

• The Sponsor does not expect the Management Reorganization to have any material impact on the operations of the Trust.
• The Sponsor believes that the Trust's Shares would qualify for listing and trading under the Generic Listing Standards, but the Trust makes no representation as to when or if such approval and relief will be obtained.
• The Sponsor believes that it is generally more efficient, and therefore less costly, for spot commodity exchange-traded products to utilize in-kind orders rather than cash orders.
• The Sponsor believes that the security procedures in place for the Trust... are reasonably designed to safeguard the Trust's XRP.
• The Sponsor believes the Index Provider's selection process for Constituent Trading Platforms as well as the methodology of the Index Prices algorithm provides a more accurate picture of XRP price movements than a simple average of Digital Asset Trading Platform spot prices.
• The Sponsor has not observed a material difference between the Index Price and average prices from the constituent Digital Asset Trading Platforms individually or as a group.
• The Sponsor has committed to causing the Trust to irrevocably abandon all Incidental Rights and IR Virtual Currency to which the Trust may become entitled in the future.
• The Sponsor does not intend to permit the Trust to continue holding XRP in a way that would violate the federal securities laws (and therefore would either dissolve the Trust or potentially seek to operate the Trust in a manner that complies with the federal securities laws, including the Investment Company Act).
• For so long as the Sponsor believes there to be good faith grounds to conclude that the Trust's XRP is not a security, the Sponsor does not intend to dissolve the Trust on the basis that XRP could at some future point be finally determined to be a security.

Industry Context

The digital asset industry is new and rapidly evolving, characterized by extreme volatility and regulatory uncertainty. XRP competes with other digital assets like Bitcoin, Ethereum, and Stellar, as well as central bank digital currencies (CBDCs) and private blockchain initiatives from financial institutions (e.g., J.P. Morgan's Onyx). The SEC and CFTC are actively developing regulatory frameworks, with recent enforcement actions against major digital asset trading platforms (Binance, Coinbase, Kraken) and ongoing discussions about digital asset classification (security vs. commodity). The filing highlights the shift towards spot digital asset ETPs and the challenges of in-kind creations/redemptions for broker-dealers.

Comparison to Industry Standards

• The Trust's 0.35% annual Sponsor's Fee is competitive, especially with the initial waiver, compared to other digital asset investment vehicles.
• The Trust's use of cold storage, multiple encrypted private key shards, and geographically distributed secure vaults for XRP custody aligns with or exceeds industry best practices for digital asset security.
• The Trust's passive investment objective to track XRP price, without leverage or derivatives, is a standard approach for spot commodity ETPs, contrasting with derivative-based products like futures contracts.
• The reliance on cash-only creations/redemptions, pending 'In-Kind Regulatory Approval,' is a novel approach for spot commodity ETPs, as most traditional commodity ETPs (e.g., gold, silver) use in-kind mechanisms, which are generally considered more efficient.
• The Trust's structure as a grantor trust for U.S. federal income tax purposes is a common approach for single-asset commodity trusts, aiming for pass-through tax treatment.
• The XRP Network's consensus-based algorithm is cited as offering near-instantaneous settlement (3-5 seconds), energy efficiency, and scalability (up to 1,500 transactions per second), differentiating it from proof-of-work (Bitcoin) or proof-of-stake (Ethereum) networks.
• XRP's market capitalization of $170.3 billion as of September 30, 2025, makes it the fifth largest digital asset, indicating significant, though not leading, standing compared to Bitcoin and Ethereum.

Management Changes

Corporate Governance

Legal Proceedings

• Osprey Funds, LLC vs. Grayscale Investments Sponsors, LLC: Osprey alleged violations of the Connecticut Unfair Trade Practices Act (CUTPA). The Sponsor's motion for summary judgment was granted on February 7, 2025, and Osprey withdrew its appeal on May 12, 2025.
• Genesis Global Capital, LLC and Genesis Asia Pacific Pte. Ltd. vs. Digital Currency Group, Inc. and affiliates (including GSO): Allegations of preferential transfers made by Genesis Capital to GSI (predecessor to GSO) during the preference period prior to Genesis Capital's bankruptcy filing. GSO believes the lawsuit is without merit and intends to defend vigorously.
• SEC vs. Ripple Labs, Inc.: District Court for the Southern District of New York held in July 2023 that XRP is not a security, but certain sales to specific buyers were investment contracts. Final judgment entered August 7, 2024, and appeals dismissed August 7, 2025.
• SEC vs. Binance, Coinbase, Kraken: SEC brought charges alleging operation of unregistered securities exchanges. Between February and May 2025, the SEC entered court-approved joint stipulations to dismiss these complaints.
• SEC vs. Mango Labs, LLC, Mango DAO, and Blockworks Foundation (Mango Enforcement Action): Described XRP as an example of a crypto asset offered and sold as a security (September 2024).
• SEC vs. Cumberland DRW, LLC (Cumberland Enforcement Action): Described XRP as an example of a crypto asset offered and sold as a security (October 2024). Joint request to dismiss approved in March 2025.

Related Party Transactions

• Digital Currency Group, Inc. (DCG) is the sole equity holder and indirect parent company of the Sponsor.
• DCG holds a minority interest (less than 1.0%) in Kraken, one of the Digital Asset Trading Platforms included in the Index.
• The Sponsor and Grayscale Securities (an Authorized Participant) are affiliates.
• The Sponsor's officers may trade XRP for personal accounts, subject to internal trading policies and procedures.
• The Sponsor has historically and may again select an Index Provider that is an affiliate (CoinDesk Indices, Inc. was an affiliate until November 20, 2023).
• Jane Street Capital, LLC (Authorized Participant) is an affiliate of JSCT, LLC (Liquidity Provider).

Stakeholder Impact

• Shareholders: Potential for increased liquidity and accessibility through NYSE Arca listing. Exposure to XRP price movements. Bear the cost of Sponsor's Fee and Additional Trust Expenses. Limited voting rights and restricted derivative action rights. May incur tax liability without associated distributions.
• Authorized Participants: Facilitate creation and redemption of Baskets, benefiting from arbitrage opportunities. Subject to federal securities laws and financial responsibility rules.
• Sponsor (Grayscale Investments Sponsors, LLC): Manages the Trust, receives Sponsor's Fee, and pays ordinary course expenses. Faces potential conflicts of interest due to affiliations and other business ventures.
• Custodian (Coinbase Custody Trust Company, LLC) and Prime Broker (Coinbase, Inc.): Provide safekeeping and execution services for XRP. Their insolvency could lead to loss of Trust assets.
• Regulators (SEC, CFTC, FinCEN): Actively scrutinizing digital asset markets, with potential for new regulations impacting the Trust and XRP.

Next Steps

• Sponsor intends to rename the Trust as Grayscale XRP Trust ETF and file a Certificate of Amendment with the Delaware Secretary of State.
• The Trust intends to list the Shares on NYSE Arca under the symbol GXRP.
• The Trust intends to rely on an exemption or other relief from the SEC under Regulation M to operate a redemption program.
• NYSE Arca may seek necessary regulatory approval to amend its listing rules to permit in-kind creations and redemptions for the Trust.
• The Sponsor will provide notice of any material changes to the Index Price calculation methodology or the Index in the Trust's periodic or current reports.
• The CFTC will launch an initiative for trading spot crypto asset contracts listed on a CFTC-registered futures exchange.

Key Dates

Recommendation

The Grayscale XRP Trust shows strong asset growth and positive price performance for XRP, along with favorable recent regulatory dismissals by the SEC for major digital asset platforms. The planned NYSE Arca listing as an ETF (GXRP) could significantly improve liquidity and investor access. However, the persistent regulatory uncertainty regarding XRP's classification as a security, the current limitation to cash-only creations/redemptions (which may hinder arbitrage efficiency), and the inherent extreme volatility of digital asset markets present substantial risks. While the long-term potential for XRP and the Trust is notable, these unresolved issues warrant a cautious 'hold' stance for seasoned investors, advising to monitor regulatory developments and market liquidity closely before making further investment decisions.

Keywords

XRP, Grayscale, ETF, Digital Asset, Cryptocurrency, Blockchain, NYSE Arca, GXRP, SEC, S-1/A, Investment Trust, Spot XRP, Crypto ETF, Asset Management, Financial Services, Ripple Labs, Coinbase, Digital Currency Group