Ripple’s CEO Brad Garlinghouse said it bluntly at a recent fintech conference: “Let’s be clear: Ripple is different than XRP.”
And yet Ripple (the company behind the XRP digital token) got smacked with another cryptocurrency class action. Filed in California, the latest Ripple complaint claims the company “created the XRP token and then used sales of the tokens in order to fund its operations and the development of the XRP ecosystem.”
The Crux of The Ripple Class Action
As is the case with another one of Ripple’s legal battles, the claimants are vexed over the cryptocurrency’s alleged failure to register with the proper authorities.
“Here, the XRP offered and sold by the defendants had all the traditional hallmarks of a security, yet defendants failed to register them as such. The purchase of XRP constitutes an investment contract, as XRP purchasers, including plaintiff, provided consideration (in the form of fiat, such as U.S. dollars, or other cryptocurrencies) in exchange for XRP. XRP purchasers reasonably expected to derive profits from their ownership of XRP, and defendants themselves have frequently highlighted this profit motive.”
The latest Ripple class action also makes a claim that the other filings haven’t. Namely that XRP isn’t decentralized, like Ethereum or Bitcoin, because Ripple has all-access control over the XRP ledger.
But is that accurate?
Ripple’s Stance: XRP and Ripple Are Two Different Things
Despite the legal storms swirling around Ripple, the company remains adamant that it has not eluded any security registration regulations. At a fintech conference this summer, Ripple’s head honcho asserted:
“XRP is not a security for three reasons: if Ripple, the company, shuts down tomorrow, the XRP ledger will continue to operate; it’s an open-source, decentralized technology …. if you buy XRP, [you are] not buying shares of Ripple – buying XRP doesn’t give you ownership of Ripple.”
Connect With A Cryptocurrency Lawyer
We must wait to see how Ripple’s class action plays out and how it will impact the burgeoning cryptocurrency market.
In the meantime: Do you need assistance with a cryptocurrency legal matter? Our experienced fintech attorneys are leading consultants in the field. We develop crypto-friendly tax positions, offer compliance consultations for ICOs. Our team also works with startups on transactional and contractual matters.
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