- In a lawsuit against Ripple, the company has filed a motion to dismiss the action for formal defects.
- The core issue of an XRP investor’s suit, whether Ripple’s XRP is a security, is not answered in the latest letter.
Is Ripple’s XRP a security according to American law? This question has been on the minds of the crypto community for over two years. The answer could have a significant impact on the success and price of XRP. So far, however, no official decision has been made. In particular, the American Securities and Exchange Commission, which in the past has only made statements to the effect that Bitcoin and Ethereum are not securities in the sense of American law, is holding back.
As a result, many observers are currently looking at a lawsuit in California in which Ripple is being sued by an investor for misleading and selling unregistered securities. The lawsuit was filed in July 2018. Since then, the proceedings have been protracted. Ripple claims that the XRP token was not developed by Ripple, but by Jed McCaleb (now at Stellar), Arthur Britto and David Schwartz (now CTO at Ripple).
Ripple cites formalities to dismiss complaint
Last Friday there was movement again in the legal action. As has now become public, Ripple has demanded that the lawsuit be dismissed for legal reasons. In a 37-page document published by the court, Ripple justified the motion to dismiss the complaint with various formalities and not with the core concern of the complaint. Jake Chervinsky, a well-known crypto lawyer, explains that the question of whether XRP is a security does not play a role in the document.
Ripple just filed a motion to dismiss the XRP securities class action. The motion is perfectly designed to delay the case as long as possible & is deeply unsatisfying for those of us who want a ruling on whether XRP is a security.
Ripple alleges in the document that investors are not entitled to make claims due to an expired deadline as the application should have been made within three years of the first offer in 2013. In addition, Ripple points out that XRP is not an investment in Ripple and that Ripple has not been sold directly to the plaintiff. Another Ripple argument is that XRP was not offered in the State of California either.
5/ But Ripple *doesn't* argue that XRP is not a security.
Yes, the motion states Ripple's view that XRP is a currency, not a security, but doesn't ask the court to rule on that issue & doesn't analyze it at all, aside from repeating the elements of the Howey test in a footnote.
— Jake Chervinsky (@jchervinsky) September 20, 2019
In addition, the Court document describes the following context in more detail:
Buying XRP is not an “investment” in Ripple; there is no joint contract between Ripple and XRP buyers; there was no promise that Ripple would help make profits for XRP owners; and the XRP ledger is decentralized.
Jake Chervinsky wrote about Ripple’s reasoning that it was a “well-designed and tactically effective response to the complaint”, which, however, was only aimed at delaying the decision.
A decision only in 2020?
For observers expecting a decision on this charge, Ripple’s latest letter is therefore a disappointment.
Chervinsky believes it will take another year for the case to be resolved. He suspects that the plaintiffs will file an objection by October 4 and Ripple will file an answer by November 4. The court will then convene an oral hearing until January 15, 2020. According to Chervinsky, the decision will not be made until a few months later.
PS/ Correction, the dates and deadlines for litigating the motion to dismiss are:
– Plaintiff's opposition brief due November 4
– Ripple's reply brief due December 4
– Parties attend oral argument in court on January 15
– The court has no deadline whatsoever to decide the motion
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— Jake Chervinsky (@jchervinsky) September 21, 2019