On Feb 26, Judge Phyllis Hamilton of the Northern District of California ruled that the class-action lawsuit filed by investors claiming Ripple sold unregistered securities will move forward. The judge also noted that digital assets that do not fall under securities law will be subject to laws against unfair, deceptive, or abusive acts or practices (UDAAP).
This means that Ripple could face more lawsuits in the future. Moreover, it could lead to legal trouble for other cryptocurrency companies claiming to not be dealing with securities.
Ripple Jumps Out Of The Securities Classification Frying Pan To The UDAAP Fire
A group of infuriated XRP investors filed a lawsuit against Ripple claiming the company violated the securities law. Ripple tried to get the case tossed out arguing that the plaintiffs missed a legal deadline, but the court ruled against Ripple.
The case will now proceed, meaning that the court believes Ripple indeed sold XRP to the plaintiffs. However, the judge dismissed some of the plaintiffs’ claims filed under California law. They were instead given a 28-day period to amend the complaints before refiling them in court.
Nonetheless, it seems that not being classified as security -what Ripple is trying to win- may bring more trouble for the San Fransisco-based fintech firm. The judge will now be looking into whether Ripple violated federal laws that warn against unfair, deceptive or abusive acts or practices (UDAAP). The court will also be investigating a possible violation of California’s Unfair Competition Law (UCL) by Ripple.
Unfortunately for Ripple, the securities classification it is striving to avoid might soon get a lot worse.
Court Ruling Puts A Target On The Backs Of Other Crypto Companies
Ripple’s court ruling runs deep. Cryptocurrency projects that argue that they do not sell securities may have lawsuits filed against them for deceptive or unfair practices under UDAAP laws.
It suggests that we could be seeing an upsurge in lawsuits filed against many cryptocurrency companies in the future. This is because anyone may file a lawsuit against a crypto company that does not comply with UDAAP laws in whatever terms including the kind of promotional materials it puts out or any undisclosed fees.
It should be noted that class-action lawsuits based on the violation of the Unfair Competition Law cost an arm and a leg to defend by the company found to be breaching it.
While many thought being classified as a security is the worst legal implication that can happen to a cryptocurrency, it appears they might have been wrong.
