On June 20, Ripple Labs Inc. has won a decisive victory in its ongoing legal challenges, most notably a federal class action lawsuit filed in the Northern District of California. The case (4:18-cv-06753-PJH)chaired by Judge Phyllis J. Hamilton, was closely monitored by the XRP community due to its potential implications for the classification of digital assets under U.S. securities laws.

Here’s what this ruling means for XRP

Judge Hamilton’s ruling granted Ripple’s motion for summary judgment, dismissing both federal and state class action claims that XRP was sold as an unregistered security. Fred Rispoli, a lawyer vocally advocating for XRP, explained meaning of this via social media: “Win ​​for Ripple in Oakland class action lawsuit. The judge will grant Ripple’s motion for summary judgment on federal unregistered securities class actions as well as state law securities class actions. But these were procedural victories.

Although Ripple successfully dismissed the class action claims, the court stopped brief of issuing a final legal decision on whether XRP constitutes a security. Instead, it said it was up to a jury to decide whether XRP met all three elements of the Howey test, which determines what constitutes a security under U.S. law.

This leaves much of the Ripple legal dispute unresolved, as Rispoli noted: “The district court level class action lawsuit has ended. However, when it comes to whether XRP is a security, the Court held that it is up to a jury to decide whether all three elements of the Howey test are met.

Rispoli added: “This claim, an individual claim by one of the plaintiffs, will go to trial, although it will most likely be settled given the extremely low damages and the very bad jury verdict that could result if the plaintiff prevails. Bottom line: The Court finds that whether XRP is a security in the context of retail purchasers on an exchange is for the jury to decide and not a matter of law.

The opinion sparked a variety of reactions from other legal experts. Marc Fagel, another lawyer from the cryptocurrency industry, pointed out the contradiction with another ruling, suggesting the complexities in the legal interpretation of digital assets: “Just read the opinion. It directly denies Torres on the programmatic sale (though it would be more engaging if the court went a step further and held that it was a securities sale under the law rather than a jury punishment).

Although Ripple achieved a procedural victory, uncertainty over XRP’s classification continues to cast a shadow. Rispoli’s comments emphasized the circumscribed scope of the ruling: “Unfortunately, it depends. XRP (via Judge Torres) has legal clarity only (1) because it involves the SEC filing allegations of federal securities violations and (2) in the Southern District of Modern York, which other courts may ignore in non-SEC cases.

The dismissal of class action lawsuits against Ripple provides the company with some ephemeral respite, but overarching legal questions regarding XRP and its status as a potential security remain unanswered. The upcoming jury decision on the application of the Howey test to XRP will be crucial.

As Rispoli summarizes, the broader issue at stake is the need for federal legislation that would address the regulatory treatment of cryptocurrencies: “Ultimately, the cryptocurrency world needs to keep the pressure on for federal legislation because we are on track to make XRP a security in California but not in Modern York.

In-depth analysis of the ruling

The lawsuit seeks class action lawsuits 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 that plaintiffs say was offered and sold as an unregistered security.

The key issues in the dispute are whether XRP should be considered a security under U.S. law and, therefore, whether Ripple’s actions in selling XRP to the public violated securities laws. Various legal maneuvers were used in this case, including motions for class certification, which were granted, allowing the case to be heard as a class action. This means that people who purchased XRP during a specific period and suffered financial losses can be represented collectively.

In the ruling, Judge Phyllis J. Hamilton made several key decisions.

Points in favor of Ripple:

• Federal Claims Denied: The court applied the “first offer” rule under the Statute of Resolution, finding that federal securities claims related to the unregistered offer and sale of XRP were time-barred because the offering occurred more than three years before the lawsuit was filed.
• State claims dismissed: Like the federal claims, the state claims for failure to register XRP as a security were dismissed. The court found that the plaintiff failed to adequately demonstrate primitiveness, a necessary element to pursue these claims under California law.
• Class claims denied: The court dismissed all class action lawsuits, both federal and state, significantly limiting the scope of the lawsuit against Ripple.

Ripple points lost:

• Misleading statements Claim proceeds: The court denied Ripple’s motion for summary judgment on an individual claim against CEO Garlinghouse for making allegedly misleading statements about his investment in XRP. That claim will go to trial, which will focus on whether Garlinghouse’s statements influenced investor expectations and investment decisions.

At press time, XRP was trading at $0.4890.

Featured image created with DALL·E, chart from TradingView.com