Ripple Court Hearing Could Expand Legal Action To Other Crypto

The Ripple court hearing for the consolidated class action against the company argued that cryptocurrencies are not securities and will fall under the federal laws that target deceptive acts or unfair practices as we are reading in the XRP news today.

The California court asserted during the Ripple Court hearing that the transactions involving cryptocurrencies that are not deemed as securities will fall under UDAAP laws and will make a way for further positive action to be taken against other cryptocurrencies that clam exemption from federal laws, especially in California. However, the application of UDAAP laws is quite dynamic and a definition for ‘’unfair’’ has not been agreed to in the crypto context by the legal community.

The Judge was considering whether Ripple could have potentially violated the Unfair Competition Law in California which prohibits unfair, unlawful and fraudulent business practices. Ripple wanted to have the claim dismissed based on the failure of the plaintiff to demonstrate that the XRP token was purchased ‘’as a part of an initiation distribution’’ and that the plaintiff also failed to prove that Ripple Labs qualified as a ‘’seller’’ under relevant federal laws.

The court ruled against Ripple and supported the claims of the plaintiff that Ripple Labs acted as a seller when issuing XRP.
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However, the Judge didn’t support the plaintiff’s allegations of misrepresentation under the California Corporations Code law. The Plaintiffs were granted about 30 days to file a complaint where they can address all of the issues of their misrepresentation claim. The discussion surrounding the application of the UDAAP law to securities was dampened for more than a year after the 2004 ruling in Bowen v Ziasun Technologies that determined that the law doesn’t apply to securities transactions based on the Federal Trade Commission Act.

The application of UDAAP laws to the crypto companies will eventually result in projects coming under fire for getting to adhere to all of the customer agreements presented to the users. The failure to explain the business practices, materials, fees, and other elements will open crypto companies to litigation under the UDAAP Laws. Companies that want to protect themselves from UDAAP claims can start introducing arbitration agreements and class action lawsuits into their terms of services.