Key Takeaways
- REX-Osprey will be the first to launch a ‘spot’ Ripple ETF.
- The 1940 Act allows for an expedited approval window of 75 days instead of 240 days under the Securities Act of 1933.
- The XRPR ETF will be comprised of 80% XRP and 20% cash, treasuries, and derivatives.
The Investment Company Act of 1940, otherwise known as the ’40 Act, was designed to minimize self-dealing, fraud, and mismanagement, which had become too common in financial firms during the 1929 Stock Market Crash and the Great Depression.
Now, it would appear to be a speedy pathway for firms to launch spot crypto exchange-traded funds (ETFs), just as REX-Osprey has with the rapid approval and launch of its spot Ripple (XRP) fund.
The ’40 Act
REX-Osprey is launching a spot Ripple ETF under the ticker XRPR this week, thanks to the ’40 Act and some unique circumstances.
Bitcoin and Ethereum ETFs took years to get off the ground as they followed the Securities Act of 1933; however, REX-Osprey opted to take an alternative route and leverage the ’40 Act.
It requires firms to register with the SEC, outline their objectives, operations, and financial health, and follow strict reporting standards.
The ’40 Act requires a diversified portfolio, reducing the risk/impact of a single asset failing.
This means it’s not a spot ETF in a “pure” sense.
In the instance of REX-Osprey’s XRP ETF, it was required to prove the fund’s structure of 80% XRP, plus cash, treasuries, and derivatives.
Under the ’40 Act, firms are required to demonstrate risk management and compliance and adhere to high investor protection standards.
Speed
The typical approach taken by most spot crypto ETFs requires firms to file a 19b-4 form with the SEC, which can take up to 240 days to review.
Under the ’40 Act, thanks to a 2021 rule amendment, applications with “substantially identical” recent precedents can have the review window knocked down to 75 days.
The SEC can also exempt any person, security, or transaction from any provision of the ’40 Act if necessary and in line with investor protections and public interest.
For example, it can use this provision to waive certain rules for custody or valuation if alternative safeguards are in place; e.g., REX-Osprey leverages a. Cayman Islands subsidiary for its XRP holdings.
If there are no objections from the SEC and all requirements are met, the ETF can go ahead.
Evidently, some review was still required, as the initial launch date for REX-Osprey’s XRP ETF was Sept. 12, but was delayed to Sept. 18, indicating some regulatory scrutiny.
Ripple’s recent legal victory over the SEC and its pre-approved market structure (aligning with the ’40 Act) likely contributed to fast-tracking the approval process.
In addition, REX-Osprey launched the first Solana staking ETF in July 2025.
The ’40 Act is conditional and case-specific, though it’s likely that REX-Osprey’s success will inspire others to consider a similar route.
Especially as over 90 crypto exchange-traded products (ETP) filings await approval.
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Eddie is a gaming and crypto writer at CCN. Covering the often weird and wonderful world of Web3 with an adoring, but skeptical eye.
Prior to CCN, Eddie has spent the past seven years working his way through the crypto, finance, and technology industry. He began with PR and journalism with Bitcoin PR Buzz and BitcoinNews.com, eventually working his way to become a copywriter with a dozen firms, including the likes of Polkadot before returning to journalism in 2023.
Having studied Radio production and journalism at University in the UK, Eddie spent a few years making podcasts and presenting on a local London radio station as he built up his writing chops.
A lifelong skateboarder, Eddie can often be found at the skatepark or touring the streets looking for something new to try. That, or kicking back playing JRPGs on his original PSP.
