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Ripple Faces New Lawsuit Alleging XRP Is a Security

Ripple Faces New Lawsuit Alleging XRP Is a Security 101
Source: iStock/Adrian Black

Ripple, the California-based startup behind the XRP cryptocurrency, is facing new challenges as it attempts to convince the crypto community, exchanges, and now the courts, that their token is not a security.

The new lawsuit that was filed with a California court on June 27 alleges that XRP must be deemed a security based on the way Ripple has managed and distributed it. If XRP is officially deemed to be a security, the suit claims that Ripple would be in violation of California securities laws by selling it to the public.

The suit further claims that Ripple is pumping the value of the XRP token through various means that could be considered illegal under relevant securities laws.

Ripple Labs, CEO Brad Garlinghouse, and a money services business unit known as XRP II LLC, were all named as defendants in the suit. The new lawsuit brings the total number of lawsuits the company is facing to three.

Previously, Ripple has been sued by a XRP investor who claimed that the company was manipulating the price of XRP through improper statements by company executives, and that it should have been registered as a security prior to being offered to the public.

In another case back in May, Ripple was accused of engaging in a “never-ending ICO,” and of marketing XRP “to drive demand and increase price,” despite the company’s claim that the token is not a security.

As Cryptonews.com previously has reported, XRP appears to have fallen out of Coinbase’s shortlist of candidates for listing on its exchange. Despite long-lived rumors of a potential listing, it is speculated that the reason the crypto exchange Coinbase is hesitating is due to concerns that the US Securities and Exchange Commission could deem XRP a security in the future.

Meanwhile, in June, speaking at the CB Insights Future of Fintech conference in New York City, Ripple CEO presented three arguments for why, in his opinion, XRP is not a security:

1. “If Ripple the company shut down tomorrow, the XRP ledger would continue to operate. It’s open-source, decentralized technology that exists independent of Ripple.”
2. “The people buying XRP, they don’t think they’re buying shares of Ripple. There’s a company called Ripple, we are a private company, we have investors… but buying XRP doesn’t give you ownership of Ripple, it doesn’t give you access to dividends or profits that come from Ripple.”
3. “XRP is solving a problem. There’s no utility in a security.”

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