The consolidated class action lawsuit was filed last year by a group of investors who accused Ripple, its XRP II subsidiary, and Ripple CEO Brad Garlinghouse of misleading them about the nature of XRP. In early December, the defendants asked the U.S. District Court for the Northern District of California to dismiss the case.
A ruling on their request was expected last month but on Jan. 15 the court took the motion under submission and postponed its decision, as news.Bitcoin.com reported.
A court case that has the future of XRP at stake continues after Ripple’s motion to dismiss it was rejected by a court in California. The plaintiffs claim that the blockchain company sold the coin as an unregistered security and demand compensation. Ripple tried to avoid the case with its defense team insisting the lawsuit had been filed too late.
Ripple’s Attempt to Dismiss XRP Court Case Fails
Although Ripple has maintained XRP is not a security, its legal representatives tried to obtain the dismissal on grounds that were different from the substance. They claimed the statute of repose had expired as the case was not filed within three years of the coin’s initial offering, and that the lead plaintiff, Bradley Sostack, bought XRP from a third party in January 2018.
Despite dismissing some of the defendants’ claims on the state level, during a hearing on Feb. 25 District Judge Phyllis Hamilton ruled that the securities claim was not invalidated under federal law, allowing the lawsuit to proceed. “Here, based on plaintiff’s complaint and the judicially noticeable facts proffered, the court cannot conclude that defendants’ first bona fide public offer to sell XRP occurred before August 5, 2016”, the court stated.
Fate of XRP Undecided Yet
Investments in XRP were made even before 2015 but the public did not learn that Ripple was selling the cryptocurrency, currently the third largest by market capitalization, until August 2016. The court further notes that while the defendants did acknowledge various 2013 offers and sales in their May 2015 settlement with the U.S. Attorney’s Office for the Northern District of California, “the sales activity identified in that settlement does not show that defendants targeted the general public when offering to sell XRP.”
The outcome of the class action lawsuit against Ripple is likely to determine the fate of XRP. If the court recognizes the cryptocurrency as an unregistered security, its value could tumble sharply as it is delisted from regulated exchanges. But even a positive development for Ripple and its management in this case may not bring an end to the problems with the XRP coin.
Federal regulators are yet to determine their stance on XRP’s status. The crypto can either be treated as a security and fall under the jurisdiction of the Securities and Exchange Commission (SEC), which can file its own lawsuit for violation of federal securities laws, or as a commodity, in which case it will be regulated by the Commodity Futures Trading Commission (CFTC).