Ripple Wins Major Procedural Victory in XRP Class Action Lawsuit

Ripple Secures Procedural Win

Ripple Labs Inc. has achieved a significant procedural victory in its class action lawsuit in California, with Judge Phyllis Hamilton ruling in favor of dismissing federal class action claims. These claims accused Ripple and its CEO Brad Garlinghouse of failing to register XRP as a security under both federal and state laws. This development marks a notable moment for Ripple as it navigates the complexities of legal and regulatory frameworks surrounding cryptocurrency.

The federal class action claims that were part of the lawsuit have been entirely dismissed by Judge Hamilton. These claims were critical as they questioned the foundational regulatory status of XRP, Ripple’s flagship digital asset. With the dismissal of these four class action claims, Ripple has effectively removed one major legal threat to its operations. However, the legal journey is far from over as one individual state law claim remains unresolved and will proceed to trial.

Future Implications on XRP and Ripple

The remaining individual state law claim will scrutinize whether XRP qualifies as a security under the Howey Test, which is a three-pronged test traditionally used to determine the presence of an investment contract. This claim, brought forward by a single plaintiff, ensures that the future legal status of XRP continues to hang in the balance, awaiting a jury’s verdict. The outcome could impose considerable implications for Ripple, potentially influencing its operational landscape and strategic direction.

The procedural victory notwithstanding, the unresolved question of XRP’s classification as a security remains central to Ripple’s future. Stuart Alderoty, Ripple’s Chief Legal Officer, has expressed satisfaction over the ruling to dismiss the federal claims. He emphasized that the company is prepared to address the remaining state law claim in the ensuing trial. A jury’s decision on whether XRP meets the prongs of the Howey Test could carry significant repercussions for Ripple, particularly around compliance and regulatory matters.

Broader Market and Regulatory Context

In conjunction with the class action lawsuit, Ripple CEO Brad Garlinghouse faces a second civil securities complaint, which is scheduled for trial soon. This complaint is particularly focused on allegations that Garlinghouse sold unregistered securities in the year 2017. The outcome of this case could also shape the regulatory landscape for both Ripple and the broader cryptocurrency market, potentially setting precedents that might affect other blockchain-based projects and digital assets.

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These ongoing legal battles have not left XRP’s market performance untouched. Ripple’s recent developments have led to fluctuations in XRP’s price, witnessing a decline of 1.85% in the past 24 hours. Furthermore, its trading volume saw a dip of 7.5%, settling at around $1 billion. Meanwhile, Ripple’s Chief Legal Officer has clarified that the New York ruling on XRP’s non-security status remains effective, providing a semblance of stability amidst the legal uncertainties. This dynamic interplay between legal rulings and market reactions underscores the intricate nexus between regulatory actions and financial market outcomes in the realm of cryptocurrencies.