Here’s an early update in Coffey v. Ripple. Plaintiff recently filed a motion to remand from federal court back to state court, which may trigger early findings as to whether Ripple’s tokens are securities – earlier than I originally thought.

Where we are in the case

A few weeks ago I published a brief overview of the Ripple litigation. The case was originally filed in California state court, but the defendants removed the case to federal court in San Francisco.

Removal to federal court is an option available to defendants in some cases.

It’s sometimes thought that federal court is a better forum for corporate defendants than state court.

What just happened

The plaintiff wants to keep the case in state court, of course, so he filed a motion remand, which means that he’s asking the federal court to send it back to state court.

This is where it gets interesting. Bear with me.

At the time of removal, defendants relied on the Class Action Fairness Act (it’s not actually about “fairness,” fyi) as their legal basis for removal.

However, under the Securities Act of 1933, securities cases cannot be removed to federal court, even if they are class actions.

Thus, the tricky procedural issue about remand turns on whether the case is a actually a securities case or not. Put differently, a court is going to have to decide whether the Ripple tokens are securities very early in the case.

What happens next

So turns out we may get some interesting answers as to whether the Ripple ICO was a securities offering, or not, earlier in the case than I anticipated. The federal court may make the determination on its own, surely asking for further briefing and possibly an evidentiary hearing, through August and September. Maybe it will send it back to the state court to make the determination.

While I think we won’t get a final decision for a few weeks or months, what we will get over the next few weeks will likely be an opposition filing from the defendants that will almost surely give us some insight on what their theories are as to why Ripple’s ICO wasn’t a securities offering.

That’s going to be a very interesting read.

There’s a preliminary hearing on the removal motion on August 1, 2018, but I don’t think the court has enough factual evidence before it to rule from the bench. But who knows? Maybe it will.