California Judge Advances Civil Securities Lawsuit Against Ripple, Sets Stage For Trial

A civil securities lawsuit against Ripple Labs XRP/USD is set to proceed to trial, following a ruling by a California judge.

What Happened: The court denied part of Ripple's motion for summary judgment, focusing on allegations that Ripple's CEO violated state securities laws in 2017, Coindesk reported.

The upcoming trial will examine whether Ripple CEO Brad Garlinghouse made "misleading statements" about the sale of securities during a 2017 televised interview.

Judge Phyllis Hamilton of the U.S. District Court for the Northern District of California dismissed four other claims in the class action lawsuit, specifically the "failure to register claims."

In response to the ruling, Ripple's Chief Legal Officer Stu Alderoty stated in an email, "We are pleased that the California court dismissed all class action claims.

The one individual state law claim that survived will be dealt with at trial."

The lawsuit centers on accusations that Garlinghouse violated California's securities laws by claiming to be "very, very long XRP" while simultaneously selling "millions of XRP on various cryptocurrency exchanges" throughout 2017.

Ripple's legal team contended that XRP does not meet the definition of a security under the Howey Test, and therefore, the claim for misleading statements should not stand.

Judge Hamilton’s ruling addressed Ripple's request to align with U.S. District Court Judge Analisa Torres’ reasoning in a parallel case in the Southern District of New York (SDNY).

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Judge Torres had previously ruled that XRP did not meet all the criteria of the Howey Test when sold directly to retail participants on crypto exchanges, marking a partial victory for Ripple.

This ruling was seen by many in the crypto industry as a step toward regulatory clarity and a potential precedent for other crypto securities cases.

However, Judge Hamilton diverged from Judge Torres’ opinion regarding XRP sales to "programmatic" traders (non-institutional).

Hamilton noted, "The court declines to find as a matter of law that a reasonable investor would have derived any expectation of profit from general cryptocurrency market trends, as opposed to Ripple's efforts to facilitate XRP's use in cross-border payments, among other things."

Hamilton concluded that Ripple’s actions could have reasonably led investors to expect profits due to the company's efforts, thus not dismissing the claim as a matter of law.

Alderoty reaffirmed that Judge Torres’ ruling in the SEC case "still stands," stating, "Nothing here disturbs that decision."

What’s Next: This development comes as the crypto community prepares for Benzinga’s Future of Digital Assets event on Nov. 19.

The event will provide a platform for industry leaders to discuss regulatory challenges, legal precedents, and the evolving landscape of digital finance.

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