Ripple Labs CEO Brad Garlinghouse has taken swipes at news outlets over inaccurate reporting of a court decision involving XRP and the US Securities and Exchange Commission (SEC).
The fiasco began following a ruling by Judge Phyllis Hamilton of the US District Court for the Northern District of California, which threw out a class action suit against the issuers of the XRP token. While considered a massive win for Ripple Labs, the judge allowed an individual state law claim to proceed to trial based on alleged “misleading statements” made by Garlinghouse in 2017.
As XRP’s community celebrated the dismissal of securities law violation, CoinDesk and a raft of crypto news outlets reported that Hamilton’s decision could imply that XRP may be a security. The reporting triggered a stir in the ecosystem as XRP enthusiasts believe the question of the asset being a security was finalized in a 2023 decision by District Judge Analisa Torres in New York’s Southern District.
CoinDesk described the ruling as a “fly in the ointment,” but the report elicited fierce kickbacks from XRP’s community, with Garlinghouse leading the charge. According to Garlinghouse on X (formerly Twitter), Garlinghouse described the report as “embarrassing,” noting that Hamilton did not expressly term XRP as a security.
He argued that only Bitcoin (BTC) and XRP have attained regulatory clarity over their status as securities, terming it as a known fact. The Ripple CEO pointed out that CoinDesk’s erroneous reporting had previously forced the hand of the news outlet to correct a misleading headline and delete a tweet.
Community notes under CoinDesk’s tweet attempted to provide context to the report by citing Judge Torres’ 2023 decision.
“Spreading this misinformation about the legal status of XRP almost one year after the Torres decision is just dishonest,” Bill Morgan, a pro-XRP lawyer based in the US.
Legal back and forths on the matter
At the time, Judge Torres ruled that XRP did not qualify as a security in its sales on exchanges or distribution by Ripple to developers and other employees. However, the ruling from 2023 disclosed that the only transactions with the toga of investment contracts are XRP sales to institutional clients.
Despite the uproar from CoinDesk’s reporting, some lawyers continue to argue that Torres’ ruling is not set in stone and district court disagreements could force the hand of a higher court to look into the matter.
“We’re going to have a lot of district courts reaching differing conclusions, and even when they reach the same conclusions, they might get there for different reasons,” said Jason Gottlieb, partner at Morrison Cohen. “Until all these cases bubble up into the appellate courts and ultimately the Supreme Court, we’re not likely to have a lot of clarity on the law in this area.”
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