Thread by @jchervinsky

0/ Let's talk about @Ripple litigation & the slow journey toward answering the question: "is #XRP a security?"

Before you ask, I don't plan to discuss my own opinion on this issue. I'd rather leave that to the courts, as I'll explain here.

Thread.

1/ Ripple is currently defending four cases in California courts:

- Two state cases in San Mateo County, brought by plaintiffs Zakinov & Oconer
- Two federal cases in the Northern District of California, brought by Coffey & Greenwald

All four cases are securities class actions.

2/ The plaintiffs allege basically the same thing: XRP is a security and Ripple violated state & federal law by failing to register it before offering, promoting, and selling it to retail investors.

If you want more details, read the Zakinov complaint:
coindesk.com/another-invest…

3/ Some background on class actions for non-lawyers: a class action is a procedural device to resolve legal claims for many plaintiffs at once (here, XRP owners) where the facts & issues are the same for everyone.

Yes, dear XRP hodler, *you* are probably a class member too.

4/ Class action settlements & judgments are usually binding on the whole class, except for members who "opt out."

So, if Ripple can resolve *one* class action, it will essentially be done litigating the XRP = security issue with all private plaintiffs (not including the SEC).

5/ You may wonder, if class actions are binding on everyone, why have four of them dealing with the same thing?

Welcome to the class action business. It's mostly (but not entirely) about money: the plaintiffs & lawyers who are *first* to win their case get the biggest reward.

6/ For several reasons, Ripple wants to consolidate these actions. Last week, they:

- moved to "relate" the federal cases = would combine Coffey & Greenwald into one
- asked to "coordinate" the state cases = would add efficiencies but state & federal cases go forward separately

7/ Recently, Coffey filed a motion to remand asking to go back to state court based on an obscure jurisdictional issue that would bore you to death.

The motion was denied last Friday, a small victory for Ripple since they prefer to stay in federal court.

https://twitter.com/jchervinsky/status/1028114623009095680

8/ Otherwise, nothing too interesting has happened yet. All of these cases are still very young. We'll know more after the upcoming case management conferences:

- Coffey, September 20
- Oconer, October 25
- Zakinov, October 26
- Greenwald, November 26

9/ Ripple also has deadlines to file responsive pleadings, meaning an answer to the complaint or a motion of some sort:

- Greenwald, August 29
- Zakinov, September 7
- Coffey, September 10
- Oconer, ???

All of these deadlines can be extended with court approval.

10/ I expect Ripple will file motions to dismiss, finally laying out their argument as to why XRP isn't a security.

MTDs are limited in scope, though. They only challenge the "legal sufficiency" of a complaint, but they have to assume all of the factual allegations are true.

11/ If an MTD is denied, we get:

- an answer admitting or denying each factual allegation
- a motion for class certification to approve the proposed class
- a motion for summary judgment seeking dismissal based on the evidence

And then Ripple deals with long, costly discovery.

12/ Timing is hard to predict, but I'd guess ~6-12 months from today to resolve an MTD and ~12-24 months for class certification & summary judgment (I could be way off).

If the case survives, it'll be set for trial, but virtually all class actions settle before reaching a jury.

13/ Long story short, I doubt the California cases will tell us much about XRP's future anytime soon.

Sure, Ripple could pull off an early settlement or dismissal, but given how class actions typically work, I doubt it.

14/ Reminder: *none* of this has to do with the SEC.

As I've mentioned before, the SEC does not make the law. They can only give their opinion, and the courts can decide to agree or not. No matter what the SEC says, these cases will move forward.

https://twitter.com/jchervinsky/status/1007673807648251905

15/ This may be one reason why the SEC hasn't weighed in on XRP yet.

The security issue is already pending in the California cases. The SEC can sit back and watch the class action plaintiffs litigate the issue for them; if the plaintiffs win, the SEC can move against XRP later.

16/ If the plaintiffs lose, the SEC will have saved a lot of time & money.

Keep in mind that they have limited resources for the #crypto space, and they have their hands full prosecuting ponzi schemes and outright frauds. Staying quiet now may simply be good resource management.

17/ Of course, it's possible the SEC doesn't care about the California cases at all & will move forward (or not) on their own time.

If Ripple wins or settles in California, the SEC could file its own suit in New York & say the west coast got it wrong. This wouldn't be improper.

18/ Anyway, @Ripple is taking all of this very seriously. They hired a top-tier securities litigation team to represent them, including a former SEC Chair & a former SEC Director of Enforcement.

They're clearly geared up for a fight. From what I can tell, it may be a long one.