Ninth Circuit Court of Appeals affirms dismissal of class action lawsuit, citing statute of repose
Ripple has achieved another significant legal victory in its ongoing battle over XRP’s regulatory status, with the US Court of Appeals for the Ninth Circuit upholding a lower court’s decision to dismiss securities fraud claims against the blockchain payments company. The appellate court ruled that federal Securities Act claims brought by investors were time-barred under the statute of repose, effectively closing the door on this particular avenue of litigation.
Timeline Proves Critical in Court Ruling
The case centered around Bradley Sostack, who purchased XRP tokens in January 2018 through the Poloniex exchange. Despite filing the underlying class action complaint later that same year and being appointed lead plaintiff in 2019, Sostack’s legal team found themselves fighting against the clock in more ways than one.
The crux of the appeal hinged on when XRP was first “bona fide offered to the public” for purposes of the Securities Act’s three-year statute of repose. The court’s finding proved devastating to the plaintiffs’ case, as the panel determined that Ripple had been offering XRP to the public as early as 2013 through sales on the XRP Ledger’s built-in digital asset exchange.
Court Emphasizes Early XRP Distribution Activity
According to court records, Ripple sold over 500 million XRP tokens on the Ledger’s built-in exchange during these early years. The appellate panel made clear that these transactions constituted public offerings despite the technical sophistication required to navigate the platform at the time.
“Those offers were made ‘to the public’ even if only technologically sophisticated consumers could navigate the Ledger to purchase XRP,” the court stated in its memorandum, rejecting arguments that the early distribution should be treated differently from later, more accessible sales.
Plaintiffs’ Strategy Fails to Reset Legal Clock
Sostack’s legal team attempted to argue that Ripple’s 2017 decision to begin releasing XRP holdings in monthly tranches constituted a separate offering that should restart the statute of repose period. This strategy, if successful, would have allowed the 2018 class action filing to proceed within the required three-year window.
However, the Ninth Circuit panel firmly rejected this approach, emphasizing the fungible nature of XRP tokens regardless of when they were distributed. The court noted that “the nature of XRP did not change between 2013 and 2017; all XRP cryptocurrency remained fungible and interchangeable,” making it impossible to treat the distributions as distinct legal offerings.
Market Response and Broader Implications
Following the court decision, XRP was trading at $1.88, reflecting continued market confidence in Ripple’s legal position. This latest victory adds to Ripple’s string of courtroom successes, particularly following the landmark ruling in SEC v. Ripple that determined XRP sales to retail investors did not constitute securities offerings.
The decision carries broader implications for the cryptocurrency industry, as it demonstrates how traditional securities law statutes of limitations can provide additional protection for blockchain companies facing retrospective legal challenges. The ruling also highlights the importance of early blockchain activity in establishing legal precedents for token distributions.
Looking Forward
While this decision represents a significant victory for Ripple, the court’s ruling was deliberately narrow in scope. The Ninth Circuit explicitly limited its holding to the specific claims covered under the district court’s Rule 54(b) certification, leaving room for other legal theories or claims to potentially proceed.
For XRP holders and the broader cryptocurrency community, this ruling provides additional clarity on how courts may evaluate the timing of token offerings and the application of securities law to blockchain-based assets. As regulatory frameworks continue to evolve, such precedents become increasingly valuable for both companies and investors navigating the complex intersection of traditional financial law and innovative blockchain technology.