What happened with the class action lawsuit against Ripple Labs?
The Ninth Circuit Court of Appeals recently decided not to allow a class action lawsuit against Ripple Labs regarding the sale of XRP tokens as unregistered securities to proceed. This decision upheld a previous dismissal by a lower court, marking a significant legal win for Ripple.
In the lawsuit, initiated by Bradley Sostack in 2019, it was alleged that Ripple Labs unlawfully sold XRP tokens in violation of federal securities laws. Sostack claimed that Ripple's sales, particularly a distribution of tokens in 2017, breached the Securities Act of 1933.
The district court dismissed the case, highlighting that Sostack's claims were barred by the three-year statute of repose. This statute necessitates that investors must file claims within three years of a security being offered to the public. Specifically, XRP first became publicly available in 2013, yet Sostack did not submit his complaint until 2018-2019.
Additionally, the court determined that the 2017 distribution did not represent a separate offering and thus did not extend the statutory time limit for claim submission.
On appeal, the Ninth Circuit supported the lower court’s ruling, reinforcing that no substantial facts were presented to dispute the applicability of the statute of repose. The court rejected the arguments suggesting that the later XRP distribution constituted a fresh offering or that the overall economic reality of XRP should alter the timeline.
As a result, Sostack's federal securities claims remain barred due to time constraints, confirming Ripple’s legal position and highlighting significant implications for the cryptocurrency market.