Ripple, the third most valuable cryptocurrency in terms of market capitalization after Bitcoin and Ethereum, is facing a major lawsuit that could determine its future, and the legal team in charge of defending the XRP token seems to be doing a good job. Digital currency investors have been paying close attention to the case because XRP is one of the few tokens with a dedicated business development team, which means that traders can take positions based on fundamental analysis.
The lawsuit in question goes back to 2018; it was filed by a group of investors who claim that XRP is an investment asset that should have been offered as a registered security. In 2013, Ripple tokens were released through a mechanism known as initial coin offering, which has been subject to regulatory scrutiny because some of them should be administered as offerings of investment securities. The response recently filed by Ripple Labs has been awaited by many investors and legal analysts; a court determination that XRP is a security would set a worrisome precedent for all cryptocurrencies, and a favorable outcome for Ripple would likely translate into a bullish sentiment.
The Legal Case Surrounding Ripple
According to legal analysts who have reviewed the motion to dismiss filed by Ripple Labs, the company is doing well in terms of strategy. The first line of defense presented is an assertion: the plaintiff investors should have filed their complaints within three years of XRP initial coin offering, which means that they ran out of statutory time. The second line of defense goes on to explain that XRP does not meet the criteria that can be applied to an investment. What is more interesting, however, is that the Ripple Labs legal team has skirted the issue at hand by refusing to get into the minutiae of whether XRP should be handled as a registered security.
It should be noted that financial securities are not necessarily equity investments; they can also be derivatives contracts or debt instruments. In the case of XRP, it is in the best interest of Ripple Labs to not fall in the categories of investments or registered securities; after all, the company wants XRP to be a digital currency and a system for electronic payments. Should the lawsuit be dismissed based on the aforementioned filing, this would be good news and an opportunity to go long on XRP, which as of September 21 was trading just under $0.29. The most bullish projections for XRP call for an exchange rate of $1.00 in 2019.
