A civil lawsuit on a securities claim against Ripple CEO Brad Garlinghouse will proceed to trial in California, as reported by a local newspaper. The judge dismissed several other claims made in the lawsuit, ruling that a civil securities lawsuit against Ripple will move forward to trial. The lawsuit alleges that Ripple’s CEO violated state securities laws in 2017.
A jury will hear arguments on whether Ripple CEO Brad Garlinghouse made misleading statements in connection with the sale of securities in a 2017 televised interview. The other four claims in the class action securities lawsuit, known as the “failure to register claims,” were dismissed by Judge Phyllis Hamilton of the U.S. District Court for the Northern District of California.
Ripple’s Chief Legal Officer, Stu Alderoty, expressed satisfaction with the dismissal of all class action claims, stating that the one individual state law claim that survived will be addressed at trial. The plaintiff alleges that Garlinghouse violated California’s securities laws by claiming to be “very, very long XRP” while selling millions of XRP on various cryptocurrency exchanges throughout 2017.
Ripple’s lawyers argued that the claim should be dismissed because XRP does not meet the definition of a security under the Howey Test and cannot give rise to a claim for misleading statements in connection with a security. In her ruling, Judge Hamilton broke with a legal opinion from the Southern District of New York, stating that XRP sold to non-institutional traders could be considered a security if investors expected profit due to Ripple’s efforts.
The ruling in the SEC case by Judge Analisa Torres still stands, according to Ripple’s Chief Legal Officer. The decision in the California court case could impact future regulatory decisions regarding cryptocurrencies and securities. The outcome of this trial will be closely watched by the crypto industry for its implications on the classification of digital assets and the responsibilities of companies like Ripple in disclosing information to investors.
This development underscores the ongoing debate surrounding the classification of cryptocurrencies and the application of securities laws to the rapidly evolving digital asset market. The outcome of this trial could set a precedent for future cases involving the sale and marketing of cryptocurrencies, shaping the regulatory landscape for blockchain-based companies in the United States. As the legal proceedings continue, stakeholders in the crypto industry will be monitoring the case closely for its potential impact on investor protection and regulatory clarity in the digital asset space.