Regulation

Judge Dismisses Most Ripple Claims, One Goes to Trial

Published

6 months ago

June 21, 2024

Ripple has secured a procedural victory as a judge dismissed several claims in the Oakland class action lawsuit.

The U. S. District Court for the Northern District of California granted Ripple’s motion for summary judgment on federal class claims for unregistered securities and state law securities claims.

Dismissal of Ripple Federal and State Law Claims

Judge Phyllis Hamilton tossed out most of the class action claims against Ripple. Both the federal class claims for unregistered securities and the state law securities claims were dismissed, which is a procedural victory for Ripple.

However, the dismissal did not address the fundamental question of whether XRP is a security.

Ripple’s Chief Legal Officer, Stu Alderoty, showed his satisfaction with the court’s decision and said,

“We are glad that the California court has dismissed all the class action claims. The only individual state law claim that has been left will be addressed in the trial.”

XRP Security Status to Be Decided by Jury

However, the court stated that the status of XRP as a security is still uncertain even with the procedural wins. The court stated that it is for a jury to decide whether all three prongs of the Howey test are satisfied.

Besides the class action, another civil securities lawsuit against Ripple CEO Brad Garlinghouse will also go to trial. In this case, the court denied part of Ripple’s motion for summary judgment on the claim that Garlinghouse sold unregistered securities in 2017. The plaintiff alleges that Garlinghouse lied about being “very, very long XRP” while dumping millions of XRP on various exchanges.

However, legal expert Fred Rispoli noted on X that the likelihood of a settlement is high, given the low damages and potential negative jury verdict for Ripple if the plaintiff wins. Rispoli also stressed that the question as to whether XRP is a security or not remains unanswered and noted that federal legislation is required to address this issue.

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, a individual claim by one plaintiff, will go to trial (though…2/4
— Fred Rispoli (@freddyriz) June 20, 2024

Ripple’s attorneys stated that XRP does not fit the Howey Test’s definition of a security and therefore, the case should be thrown out. Nevertheless, Judge Hamilton decided that the case should proceed to trial and held that it cannot be decided as a matter of law that Ripple’s conduct would have led a reasonable investor to expect profits because of the company’s efforts.

Motions to Seal and Upcoming Deadlines

At the hearing, the court ordered both parties to reconsider their motions to seal any part of the briefs on the basis of the court’s decision to deny their motions. Both the parties have filed their unredacted briefs and have also moved the court to allow them an extra three weeks to file a motion to seal some of the exhibits they have used.

The court allowed this and set the new deadline to file the motion to seal with the narrowed grounds to July 8, 2024. As for the motion to seal, a separate order will be issued regarding the narrowed motion.

However, Judge Hamilton’s ruling is different from that of U.S. District Court Judge Analisa Torres in the Southern District of New York who held that XRP was not a security when sold to retail investors because it did not meet all the elements of the Howey Test.