On June 20, Ripple Labs Inc. A pivotal victory in its ongoing legal challenges, specifically in the federal class action lawsuit filed in the Northern District of California. the Status (4:18-cv-06753-PJH), presided over by Judge Phyllis J. Hamilton, has been closely watched by the XRP community due to its potential implications for the classification of digital assets under US securities law.
Here's what the ruling means for XRP
Judge Hamilton's ruling granted Ripple's summary judgment motion, dismissing federal and state claims that XRP was sold as an unregistered security. Fred Rispoli, pro-XRP lawyer, to explain Why it matters via social media: “Ripple wins Oakland class action. Judge grants Ripple's summary judgment motion on federal class claims for unregistered securities as well as securities claims under state law. But these were procedural victories.”
Although Ripple successfully dismissed the class action claims, the court declined to make a final legal decision on whether XRP represents a security. Instead, he said it's up to a jury to decide whether XRP meets all three prongs of the Howey Test, which defines what constitutes a security under US law.
This leaves much of Ripple's legal battle unresolved, as Rispoli noted: “The class action lawsuit has now concluded at the district court level. As for whether XRP is a security, the court held that it would be up to a jury to decide whether The three prongs of the Howey test are met or not.
“This claim, an individual claim from one of the plaintiffs, will go to trial even though in all probability it will be settled given the very low damages and very poor jury verdict that would result if the plaintiff wins,” Rispoli added. Whether XRP serves as a security in the context of retail buyers on the exchange is a matter for a jury to decide and is not a matter of law.”
This opinion has drawn mixed reactions from other legal experts. Mark Fagle, another cryptocurrency lawyer, pointed out a discrepancy with another ruling, suggesting complexities in the legal interpretation of digital assets: “Just read the opinion. It directly contradicts Torres regarding automated sales (although he was a “It would have been more interesting if the court had gone further and found that the securities sales were a matter of law rather than pursuing them before a jury.”
While Ripple achieved a procedural victory, uncertainty over XRP's taxonomy continues to cast a shadow. Rispoli's comments underscore the ruling's limited scope: “Unfortunately, it depends. XRP (via Judge Torres) has legal clarity only (1) because it involves the SEC bringing allegations of federal securities violations and (2) in the Southern District of New York, which other courts can ignore in non-SEC cases.”
The dismissal of the class action lawsuits against Ripple provides a temporary respite for the company, but the overarching legal questions surrounding XRP and its status as a potential security remain unanswered. The jury's upcoming decision on whether to apply the Howey test to XRP will be crucial.
As Rispoli summarizes, the broader issue at stake is the need for federal legislation to address the regulatory treatment of cryptocurrencies: “Ultimately, the crypto world needs to keep pushing for federal legislation, because we are on track to make XRP a security in California.” But not in New York.”
An in-depth study of governance
The lawsuit includes class-action claims against Ripple Labs Inc. and its subsidiary XRP II, LLC and Ripple CEO Bradley Garlinghouse. The lawsuit centers on allegations related to the sale and marketing of XRP, a digital asset, which plaintiffs say was offered and sold as an unregistered security.
Key issues in the lawsuit include whether XRP should be considered a security under US law, and therefore whether Ripple's actions of selling XRP to the public violated securities laws. This case saw numerous legal maneuvers, including requests for class certification, which were granted, allowing the case to proceed as a class action. This means that individuals who purchased XRP during a specific period and suffered a financial loss can be represented collectively.
In the ruling, Judge Phyllis J. Hamilton made several key decisions.
Points in favor of Ripple:
- Federal claims denied: The court applied the “first offer” rule under the STOP Act, concluding that the federal securities claims relating to the unregistered offer and sale of XRP were barred because the offer occurred more than three years before the lawsuit commenced.
- Rejection of state claims: Similar to the federal claims, state claims for failing to register XRP as a security were dismissed. The court found that plaintiff had not adequately demonstrated privacy, a necessary element of these claims under California law.
- Class claims rejected: The court dismissed all class actions for both the federal and state claims, significantly reducing the scope of the lawsuit against Ripple.
Missing points in ripple:
- Proceeds of a Misrepresentation Claim: The court denied Ripple's request for summary judgment on the individual lawsuit against CEO Garlinghouse for allegedly making misleading statements about his investment in XRP. This claim will go to trial, with the focus on whether Garlinghouse's statements influenced investors' expectations and investment decisions.
At press time, XRP was trading at $0.4890.
Featured image created with DALL·E, chart from TradingView.com
