Federal District Court Judge Phyllis Hamilton of the Northern District of California ruled that a class action lawsuit against Ripple Labs can proceed, which is a major blow to Ripple Labs and possibly will have a negative impact on the Ripple (XRP) market.
The class action lawsuit alleges that Ripple Labs sold Ripple (XRP) to investors without registering as a security with the Securities and Exchange Commission (SEC), resulting in damages to investors.
Essentially, companies selling registered securities are required to provide investors with certain information in order to educate investors about the risks, but Ripple Labs did not provide such information. For example, investors may have been unaware that Ripple Labs sells large amounts of Ripple (XRP) every month, suppressing the market.
Ripple Labs’ defense strategy against this lawsuit centered around getting the lawsuit dismissed, but now that it will proceed Ripple Labs and the Ripple (XRP) market may be in for some turbulence. This is especially true because Ripple (XRP) undoubtedly meets the SEC’s definition of a crypto security, which is a crypto asset that is sold by a centralized company in exchange for money, and the investors who buy the crypto asset expect profit.
Therefore, Ripple (XRP) could get declared a security, which could damage Ripple Labs and wreak havoc on the Ripple (XRP) market. That being said, it will take many months for the trial to happen, and there is a chance Ripple Labs will win considering how much money they have to fight the case.