On June 20, Ripple Labs Inc. has scored significant victories in its ongoing legal challenges, particularly in a federal class action lawsuit filed in the Northern District of California. The case (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 It Means To Dominate With XRP
Judge Hamilton’s decision granted summary judgment to Ripple, dismissing both the federal and state class claims that XRP was sold as an unregistered security. Fred Rispoli, spokesperson for XRP, explained the importance of this via social media: “Win Ripple at the Oakland stage. The judge granted Ripple summary judgment on the federal class’s unregistered securities claims and state law securities claims. But these were the results of the process. “
Although Ripple successfully dismissed the class action claims, the court declined to make a definitive legal determination that XRP constitutes a security. Instead, it said it was up to a judge to decide whether XRP met all three prongs of the Howey test, which determines what constitutes a security under US law.
This leaves a large part of Ripple’s legal battle unresolved, as Rispoli noted: “The class action has ended at the district court level. As to whether XRP is a security, however, the Court ruled that it is up to the jury to determine whether all three prongs of the Howey test are met.”
Rispoli added, “that claim, an individual claim by a single plaintiff, will go to trial or possibly, we will settle for very low damages and a negative jury verdict that would result if the plaintiff wins. Summary: The court says that XRP is a protection in the case of exchange traders is to be the judge decide not a matter of law.”
The opinion has sparked mixed responses from other legal experts. Marc Fagel, another lawyer in the field of crypto, expressed his opposition to another decision, raising difficulties in the legal interpretation of digital assets: “Just read the opinion. It directly contradicts Torres on organized sales (although it would be very interesting if the court went a step further and found them to be sales of securities as a rule instead of punishing in court).”
Although Ripple has achieved a procedural victory, the uncertainty surrounding the XRP split continues to cast a shadow. Rispoli’s comments underscored the limited scope of the decision: “Sadly, it depends. XRP (through Judge Torres) only has legal clarity (1) as it involves the SEC making allegations of federal securities violations and (2) the Southern District of New York, which other courts cannot ignore in non-SEC cases.”
The dismissal of the class action claims against Ripple provides a temporary reprieve for the company, but the highest legal questions surrounding XRP and its status as a potential security remain unanswered. The upcoming jury verdict on the application of the Howey test to XRP will be important.
As Rispoli sums up, the broader issue at stake is the need for federal legislation to address the management of crypto currencies: “Finally, the crypto world needs to keep up the pressure on getting federal legislation, because we are on the way to XRP becoming a security in California. but not in New York.”
Critical Assessment of Decision
The lawsuit involves class action claims against Ripple Labs Inc., its subsidiary XRP II, LLC, and Ripple CEO Bradley Garlinghouse. The lawsuit focuses on allegations related to the sale and marketing of XRP, a digital asset, which the plaintiffs contend was offered and sold as an unregistered security.
Key issues in the case include whether XRP should be considered a security under US law, and as such, whether Ripple’s actions in selling XRP to the public violated securities laws. In this case there were various legal actions, including motions for class certification, which were granted, allowing the case to proceed as a class action. This means that people who bought XRP at a certain time and lost money can be collectively represented.
In her decision, Judge Phyllis J. Hamilton made several important decisions.
More places to stay in Favor Of Ripple:
- State Claims Dismissed: The court applied the “priority offer” rule under the rescission clause, concluding that government securities claims related to the unregistered offering and sale of XRP were barred because the offer occurred more than three years before the lawsuit was filed.
- State Claims Dismissed: Similar to the federal claims, the federal claims for failing to register XRP as a security were dismissed. The court found that the plaintiff did not demonstrate sufficient good faith, a requirement for these claims under California law.
- Class Action Claims Dismissed: The court dismissed all class claims for both the federal and state allegations, significantly reducing the scope of the lawsuit against Ripple.
Points Lost:
- Misleading Statements Claim Continues: A court has dismissed Ripple’s motion for summary judgment on an individual claim against CEO Garlinghouse for making misleading statements about his investment in XRP. The lawsuit will continue to be litigated, focusing on whether Garlinghouse’s statements influenced investors’ expectations and investment decisions.
At press time, XRP traded at $0.4890.
The featured image was created with DALL·E, a chart from TradingView.com
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