XRP Non-Security Status Is At Stake in California. Here’s why

The legal status of XRP remains in flux in the minds of many investors and crypto community members. A recent California court ruling has reignited uncertainty, potentially classifying XRP as a security within the state.

Fred Rispoli, a prominent attorney and pro-crypto figure, shared the news on X. This development comes amid an ongoing lawsuit filed by the U.S. Securities and Exchange Commission (SEC) against Ripple. The SEC alleges that Ripple sold XRP as unregistered securities, and the lawsuit is near its end.

California Court Hands Decision to Jury

On Thursday, U.S. District Court Judge Phyllis Hamilton in California ruled that a civil securities lawsuit against Ripple could proceed. The lawsuit, filed by investor Ryan Zakinov, hinges on whether XRP constitutes a security under California law specifically for retail investors who purchased it on cryptocurrency exchanges.

This ruling marks a setback for Ripple. In July 2023, Judge Analisa Torres ruled that non-institutional XRP sales do not constitute securities offerings. This ruling covers sales to retail investors, but Judge Hamilton deviated from this precedent. Judge Jed Rakoff who presided over the case against Terraform Labs also deviated from Judge Torres’ ruling, creating inconsistency across jurisdictions.

Potential Impact of the Security Classification

The potential classification of XRP as a security in California, despite its status elsewhere, highlights the need for consistent federal regulations within the cryptocurrency industry. Ripple’s Chief Legal Officer (CLO) Stuart Alderoty drew attention to this inconsistency, and Rispoli called on the crypto community to demand proper Federal legislation for cryptocurrencies.

If XRP is ultimately classified as a security in California, Ripple could face significant consequences. As a security, XRP would fall under stricter regulations enforced by the SEC. This could include registration requirements, disclosure mandates, and limitations on how Ripple can sell and distribute XRP.

The classification could also impact cryptocurrency exchanges operating in California. They may be required to register with the SEC or face restrictions on trading XRP.

Ripple Maintains Fight for Clarity

The California court decision complicates the ongoing legal battle surrounding XRP. Some investors still have cold feet, and this ruling might discourage them from adopting XRP. The lack of clear and consistent regulations across jurisdictions creates uncertainty for Ripple, XRP investors, and cryptocurrency exchanges.

Ripple has vowed to continue its fight for clarity on XRP’s regulatory status. In November 2023, CEO Brad Garlinghouse previously expressed his willingness to take the case to the Supreme Court, and this uncertainty might require a final decision from the highest court in the U.S.

Disclaimer: This content is meant to inform and should not be considered financial advice. The views expressed in this article may include the author’s personal opinions and do not represent Times Tabloid’s opinion. Readers are urged to do in-depth research before making any investment decisions. Times Tabloid is not responsible for any financial losses.

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Tobi Loba

Tobi Loba is a passionate writer with a vast interest in the stock market. She joined the crypto ecosystem about three years ago and has written lots of ebooks and articles in relation to cryptocurrency and blockchain projects. Tobi Loba earned her degree at the University of Ibadan.