Ripple Avoids Securities Question in Motion to Dismiss XRP Lawsuit
Ripple has filed a motion to dismiss a lawsuit claiming it violated U.S. securities laws by selling XRP.
In a new filing posted early Friday, attorneys for Ripple pushed back on allegations made by XRP purchasers suing the company, its subsidiaries and executives. Notably, the motion to dismiss specifically claims that the plaintiff, Bradley Sostack, does not have standing to file a complaint, rather than address claims that XRP is a security.
In the motion to dismiss, Ripple states that the plaintiff failed to bring a case within three years of the initial offering (which would have been 2013), meaning the statute of repose expired; that the plaintiff did not “plausibly allege” that he purchased XRP during the initial offering; and that the plaintiff did not “plausibly allege” that any of the defendants actually sold the XRP that he bought.
Notably absent from the motion to dismiss is a full-fledged argument over why XRP is not a security. Indeed, the filing only addresses the question in a footnote (footnote 19), which states that XRP is not a security “because it is not an ‘investment contract.'”
The filing goes on to say:
“Purchasing XRP is not an ‘investment’ in Ripple; there is no common enterprise between Ripple and XRP purchasers; there was no promise that Ripple would help generate profits for XRP holders; and the XRP Ledger is decentralized.”
The footnote also adds that “because XRP is a currency,” it cannot also be a security under law. The filing states that the court itself does not need to determine “whether XRP is a security or currency for purposes of this motion, which assumes Plaintiff’s allegation that XRP is a security.”
The filing also states that “the federal Departments of Treasury and Justice publicly concluded that XRP is a ‘convertible virtual currency,'” in its “factual background” section.
“This is consistent with the CFTC’s position that virtual currency is a commodity,” the filing states. “Nonetheless, Plaintiff alleges that XRP is a ‘security’ under federal and state law, … and that Defendants have offered and sold XRP despite its non-registration with securities authorities.”