Is XRP a Security?
Ripple Lab’s defense team, involved a class action lawsuit against XRP, has showcased a procedural maneuver to have the case bumped up to the federal court. Ripple lab, the blockchain company behind XRP token is being sued for failing to register XRP as security. The plaintiff accuses Ripple of allegedly profiting from a market manipulation scheme that jacked up XRP’s prices. The cryptocurrency community continues to debate whether XRP is entirely decentralized. Decentralization is a key requirement of all cryptocurrecies.
Ripple labs reserves all the rights pertaining to issuance and distribution of the XRP tokens. This approach raises concerns of how much control Ripple has over XRP. Ripple’s active association with traditional banking institutions further fuels the allegations.
Ripple Lab’s attorney is Peter Morrison a partner at the renowned law firm of Skadden, Arps, Slate, Meagher & Flon. Morrison argues that because of the case’s consolidated nature “brought on behalf of a worldwide class, with no geographic limitations,” the case was eligible for removal to the Federal Court.
Citing the Class Action Fairness Act, “a putative class action may be removed to the appropriate federal district court if (1) the action purports to be a ‘class’ action brought on behalf of 100 or more members; (2) any member of a class of plaintiffs is a citizen of a state different from any defendant; and (3) the amount in controversy exceeds $5 million,” Morris argues that the case at hand met all the above mentioned requirements thus warranting its removal.
Weighing in on the recent Ripple’s move, security’s attorney Jake Chervinsky terms the move as ‘brilliant’. He, however, shies from mentioning the company’s odds of winning the case. But he states that, based on the amount of energy Ripple’s defense placed on having the case moved to Federal Court, it was fair to assume that the team was moving to a favorable battleground.
XRP is currently the 3rd largest cryptocurrency per market capitalization below Bitcoin and Ethereum respectively. If the ruling favors Ripple, the company will have to come up with more elaborate guidelines on its crypto.
This will definitely affect other cryptos as well. Recently, the U.S. Securities Exchange Commission (SEC) announced that companies dealing in Initial Coin Offerings (ICOs) should register. The SEC believes that ICOs raise development funds just as IPOs (Initial Public Offerings) do. Accordingly, they should be subject to the same regulations. Finally, Regulatory authorities are having a hard time wrapping their heads around the cryptocurrency industry. Specific countries have gone to the extremes of banning all crypto-related dealings. Others like France, have embraced the futuristic currency by enacting policies that will govern the industry and allow it to thrive. France in particular has proposed slashing down of taxes on Bitcoin gains to 30% like all other capital gains.