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- On June 20, Ripple Labs Inc. secured a significant win in the federal class action with Judge Phyllis J. Hamilton granting summary judgment to dismiss both federal and state class claims that XRP was sold as an unregistered security.
- Despite the dismissal of the class action claims, the court left the question of whether XRP is a security to be decided by a jury, based on the Howey test’s criteria.
On June 20, Ripple Labs Inc. achieved a significant victory in its legal battles, particularly in the federal class action lawsuit filed in the Northern District of California. The case (4:18-cv-06753-PJH), overseen by Judge Phyllis J. Hamilton, has been closely watched by the XRP community due to its potential impact on the classification of digital assets under US securities law.
Judge Hamilton ruled in favor of Ripple by granting their motion for summary judgment, thereby dismissing both federal and state class claims that XRP was sold as an unregistered security. Pro-XRP lawyer Fred Rispoli highlighted the importance of this decision on social media:
Win for Ripple in the Oakland class action. Judge grants Ripple’s summary judgment motion on federal class claims for unregistered securities as well as the state law securities claims. But these were procedural wins.
XRP’s Security Status Remains Unclear
Despite Ripple’s success in dismissing the class action claims, the court did not make a definitive ruling on whether XRP is a security. Instead, it determined that a jury should decide if XRP meets all three criteria of the Howey test, which defines security under US law.
However, Rispoli said that this still leaves Ripple’s legal battle against the SEC unresolved. The pro-XRP lawyers added:
The class action is now over at the district court level. As to whether XRP is a security, however, the Court held it is for a jury to decide whether all three prongs of the Howey test are met. That claim, an individual claim by one plaintiff, will go to trial though in all likelihood, will settle given the extremely low damages and very bad jury verdict that could result if plaintiff wins. To sum up: Court says whether XRP is a security in the context of retail buyers on an exchange is for the jury to decide and not a matter of law.
The opinion has elicited diverse reactions from legal experts. Marc Fagel, another attorney in the crypto sector, highlighted a contradiction with a different ruling, indicating the complexities in the legal interpretation of digital assets.
A Temporary Relief for Ripple
The dismissal of class action claims against Ripple provides a temporary reprieve for the company. However, the broader legal questions about XRP’s status as a potential security remain unresolved. The impending jury decision on whether XRP meets the Howey test’s criteria will be pivotal.
Fred Rispoli emphasizes that the core issue is the necessity for federal legislation to clarify the regulatory framework for cryptocurrencies. He added:
Ultimately, crypto world needs to keep pressure on getting federal legislation, because we are on track to having XRP be a security in California but not in New York.
