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Ripple Moved the Lawsuit from State Court to Federal Court


Ripple has been making a lot of noise lately. With the xRapid being adopted by banks and other companies, it hopes to lessen the cost of cross-border transactions. Because of its latest product that claims to “bridge” fiat and currency, it has surpassed Ethereum momentarily in different occasions in the top ten cryptocurrencies based on market capitalization.

Moved to Federal Court

One of the problems that Ripple encountered this year is the number of lawsuits that it encountered. The lawsuits claim that Ripple has been selling investors with a security. Recently, Ripple’s legal team removed a pending securities lawsuit and moved it the federal court. The representatives for Ripple argued that the class action lawsuit was initiated by complainants with no geographical limitations and should not be handled in a state court.

Skadden, Arps, Slate, Meagher & Flom litigation partner Peter Morrison mentioned that since the amount involved in the lawsuit exceeds $5 million and brought forward by more than 100 individuals, Ripple labs can have the lawsuit moved to the federal court.

According to Morrison, “A putative class action may be removed to the appropriate federal district court if (1) the action purports to be a ‘class’ action brought on behalf of 100 or more members; (2) any member of a class of plaintiffs is a citizen of a state different from any defendant; and (3) the amount of controversy exceeds $5 million”.

Brilliant Move?

Jake Chervinsky, who is a government and enforcement defense and securities litigation attorney at Kobre & Kim, thinks that the move by the legal team of Ripple to have the lawsuit moved to the federal court is “brilliant”. Chervinsky mentioned that “Ripple’s legal team showing some tactical brilliance here. It’s hard to explain the procedural maneuver in one tweet & I’m not going to thread this, but suffice to say it’s a seriously crafty attempt to go federal. Might not work, but slick regardless”.

He also added that “State courts exercise jurisdiction over residents of other states all the time. It’s not unusual for a nationwide class action to be resolved in a state court. Also, the Securities Act of 1933 gives states and federal courts concurrent jurisdiction over private civil claims”.

But can they actually win the case? Jake Chervinsky says that he still has no idea about the odds. He said that “I can’t speak to their odds of winning since the case is still so young & I don’t know all the facts, but it’s fair to say Ripple’s lawyers think they have better odds of winning in federal court than in state court (or else they wouldn’t be trying so hard to remove the case)”.

Part of the reason why XRP wasn’t considered by the US Securities and Exchange Commission as a commodity was the lawsuit. Both Bitcoin and Ethereum have been considered as a commodity. Now, if the federal court has decided that XRP is not a security, this could easily get the price of XRP up. And also, this would mean regulatory clarity, which is something that is needed by the cryptocurrency at this point. Is this a good move by Ripple’s legal team or not?

Mark Ayesa

Mark manages our editorial team, social handles and is always on the lookout for great writing talent to contribute to our site. On a day-to-day basis he ensures the content on is of the highest quality and also carries out extensive research on any current hot topics of the crypocurrency world for our writers.