The Ninth Circuit Court of Appeals affirmed a lower court's dismissal of a federal securities class action lawsuit against Ripple Labs, Inc. and its executives, ruling that the three-year statute of repose under the Securities Act of 1933 bars the claims brought by XRP token purchasers.
In a memorandum opinion filed Jan. 27, the three-judge panel upheld the U.S. District Court for the Northern District of California's grant of summary judgment in favor of Ripple Labs, XRP II, LLC, and CEO Bradley Garlinghouse. The case stems from allegations that Ripple issued unregistered securities in violation of Section 12(a)(1) of the Securities Act.
Lead plaintiff Bradley Sostack brought the class action on behalf of himself and other federal and California state securities claims class members who purchased XRP tokens. The district court, presided over by Judge Phyllis J. Hamilton, had previously dismissed the federal claims based on the statute of repose provisions.
The appeals court panel, consisting of Circuit Judges Rawlinson, Miller, and Sanchez, heard oral arguments on Dec. 4, 2025, in San Francisco. The court held that Section 13 of the Securities Act of 1933 creates a three-year statute of repose that prevents plaintiffs from bringing certain securities claims beyond that time limit.
XRP is a cryptocurrency that operates on a blockchain network called the XRP Ledger. According to the court documents, the Ledger was launched in 2012, and its underlying code created 100 billion XRP tokens. Ripple Labs received 80 billion units of XRP when the system was established.
The XRP Ledger became publicly available in either late 2012 or early 2013, marking the beginning of public access to the cryptocurrency. In 2017, Ripple began releasing its XRP holdings to the market through monthly distributions of one billion XRP tokens.
Sostack purchased XRP tokens in January 2018 through the Poloniex cryptocurrency exchange. Later that year, he filed the class action complaint against Ripple and several other defendants, alleging violations of federal securities laws.
The central legal question in the case involved whether XRP tokens constitute securities under federal law and whether Ripple's distribution of these tokens violated registration requirements. The Securities Act of 1933 requires companies to register securities offerings with the Securities and Exchange Commission unless an exemption applies.
Section 12(a)(1) of the Securities Act creates civil liability for companies that offer or sell securities without proper registration. However, Section 13 of the Act establishes a three-year statute of repose, which creates an absolute time limit for bringing such claims regardless of when the plaintiff discovered the violation.
The statute of repose differs from a traditional statute of limitations in that it runs from the date of the alleged violation rather than from when the plaintiff knew or should have known about the harm. This creates a hard cutoff that can bar claims even if the plaintiff was unaware of the violation when it occurred.
The district court's ruling on summary judgment found that Sostack's claims were time-barred under this three-year limitation period. The Ninth Circuit's affirmance means that the federal securities claims against Ripple cannot proceed, regardless of their underlying merits.
The decision represents a significant procedural victory for Ripple Labs, which has faced multiple regulatory challenges regarding the classification of XRP tokens. The company has consistently argued that XRP should not be considered a security under federal law, while regulators and plaintiffs have contended otherwise.
This case is separate from the ongoing enforcement action brought by the Securities and Exchange Commission against Ripple Labs, which involves different legal theories and procedural requirements. The SEC lawsuit, filed in December 2020, alleges that Ripple conducted an unregistered securities offering worth more than $1.3 billion.
The Ninth Circuit's opinion is designated as not appropriate for publication and creates no binding precedent except as provided by Circuit Rule 36-3. This means the decision applies only to this specific case and cannot be cited as controlling authority in future litigation.
For cryptocurrency investors and companies, the ruling underscores the importance of understanding applicable limitation periods when considering securities law claims. The three-year statute of repose can create significant barriers to recovery even when underlying violations may have occurred.
The case also highlights the ongoing legal uncertainty surrounding cryptocurrency regulation and the classification of digital assets under existing securities laws. As the cryptocurrency industry continues to evolve, courts and regulators are still developing frameworks for applying traditional securities principles to digital assets.
Sostack's legal team has not indicated whether they plan to seek further appellate review. The Supreme Court rarely grants certiorari in cases involving procedural dismissals based on statutes of limitations or repose, making further review unlikely unless the case presents novel constitutional or statutory interpretation issues.