cryptobriefing.com
A US federal judge has allowed a civil securities lawsuit against Ripple Labs to proceed, focusing on alleged misleading statements by CEO Brad Garlinghouse about XRP.
California District Court Judge Phyllis Hamilton denied Ripple’s bid for summary judgment on June 20, setting the stage for a jury trial. The case centers on Garlinghouse’s 2017 interview claim of being “very, very long” on XRP, which plaintiffs allege contradicted his actions of selling millions of XRP that year.
Judge Hamilton’s order diverges from a previous ruling in Ripple’s favor by Judge Analisa Torres in an SEC lawsuit. Hamilton found that XRP could be considered a security when sold to retail investors, as they might have expected profits from Ripple’s efforts – a key factor in the Howey test for determining securities.
In July 2023, Judge Analisa Torres ruled that Ripple’s programmatic sales of XRP on secondary trading platforms did not constitute securities transactions but required trials for claims against Garlinghouse and Chris Larsen. The SEC later voluntarily dismissed the claims. Garlinghouse has also hinted at an XRP ETF that could be in the works.
“The court declines to find as a matter of law that a reasonable investor would have derived any expectation of profit from general cryptocurrency market trends, as opposed to Ripple’s efforts,” Hamilton wrote in her order.
This ruling challenges the widespread belief that Judge Torres’ decision would set a favorable precedent for the crypto industry in similar cases. It follows Judge Jed Rakoff’s rejection of the Ripple ruling in the Terraform Labs case, which resulted in a $4.5B settlement with the SEC.
While the judge dismissed allegations about Ripple’s failure to register XRP as a security, the case’s progression highlights ongoing legal uncertainties surrounding crypto classification and executive statements.