Leave it up to a cryptocurrency company named Ripple Labs to be at the center of a lawsuit with potentially wide-reaching consequences. In May 2018, Ripple Labs was hit by a securities class action filed in the San Francisco Superior Court and brought by Ryan Coffey, an investor in the company’s XRP cryptocurrency. The lawsuit argues that, because of past SEC comments and the way XRP is distributed and managed, XRP is a security and as such is in violation of federal securities laws.
The lawsuit is unique in the cryptocurrency scene, where the most cases revolve around fraud allegations or the legality of certain initial coin offering (ICO) “token-presales.” A favorable ruling for the plaintiffs in the class action could likely have repercussions for how other cryptocurrencies operate in markets for years to come.
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