Controversy Behind XRP as Unregistered Security

The regulatory landscape surrounding cryptocurrency remains murky in the United States, with ongoing tensions between federal rulings and state-level enforcement. 

In a surprising development, XRP—one of the most hotly debated tokens in U.S. legal history—is once again at the center of controversy.

Despite a partial legal victory in 2023 that offered some regulatory clarity, a new lawsuit filed by the Oregon Attorney General has reignited the "XRP unregistered security" debate. 

This action not only challenges XRP’s classification but also underscores the fragmented nature of crypto regulation in the U.S.

Oregon Reignites Regulatory Firestorm with Lawsuit Against Coinbase

The legal clouds surrounding XRP have thickened once again, despite a 2023 federal ruling that provided some clarity for its retail sale. 

In an unexpected development, Oregon Attorney General Dan Rayfield has filed a sweeping lawsuit against Coinbase, accusing the exchange of facilitating the sale of unregistered securities, including the much-debated XRP token.

The new case has sparked widespread concern in the crypto community, as it includes a list of 31 tokens labeled as securities, many of which had not previously been named in similar federal actions. 

Among them are AAVE, UNI, FLOW, SOL, ADA, and notably, XRP, placing the token at the heart of yet another regulatory controversy.

Read also: Latest XRP Information: $1.4 Trillion Agreement, Unexpected Shift in Trump’s Stance

XRP Named Again Despite Prior Clarity

In 2023, U.S. District Judge Analisa Torres ruled that XRP was not a security when sold on public exchanges to retail investors, marking a major win for Ripple Labs. 

The SEC had pursued Ripple since late 2020, but the judgment was widely considered a turning point that helped legitimize XRP’s status in the crypto market.

That clarity, however, has been called into question. Oregon’s complaint revives the XRP unregistered security argument by asserting that Coinbase allowed Oregonians to trade tokens that should have been registered as investment contracts.

Justin Slaughter, Vice President of Regulatory Affairs at Paradigm, highlighted the Oregon AG's move as particularly aggressive. “This is a kitchen sink lawsuit,” he posted on X (formerly Twitter), noting that the case targets far more tokens than the previous SEC action.

Oregon's Legal Rationale and Implications

The lawsuit accuses Coinbase of violating Oregon’s securities laws through its primary trading platform and Prime brokerage. 

The legal filing claims that all 31 tokens, including XRP, meet the definition of securities under the Howey Test—a U.S. legal standard used to determine what constitutes an "investment contract."

It reads: “Each unit of a listed asset trades at the same price as another unit of that same asset… and is offered and sold for consideration, including U.S. dollars and other crypto assets.”

Rayfield’s office has pushed back on Coinbase’s contention that crypto assets are inherently different from traditional securities. The AG argues that the structure and promotion of these tokens often create expectations of profit, which is central to the legal definition of a security.

Read also: XRP Bullish Analysis: How New Futures Listing Can Push Volume Upwards

Coinbase Pushes Back: Calls It a "Copycat" Lawsuit

Coinbase, which already defeated an SEC investigation earlier this year, wasted no time responding. Chief Legal Officer Paul Grewal labeled Oregon’s lawsuit a "copycat attempt" that could interfere with bipartisan legislative efforts in Congress.

"This kind of regulation-by-enforcement undermines real progress,” said Grewal. “It’s time for clarity through lawmaking, not retroactive lawsuits.”

Coinbase is expected to fight the suit vigorously, potentially leading to another long legal battle that could end up in federal court. The company has argued for clearer national guidelines instead of fragmented state-level interpretations.

Political and Market Reactions

The lawsuit has reignited political debates over the jurisdiction of state vs. federal regulators in crypto oversight. Several lawmakers have expressed concern that state actions could destabilize bipartisan efforts in Washington, particularly around bills focused on defining digital asset classifications.

Meanwhile, XRP's price briefly dipped following the news, although it remains higher year-to-date. The market reaction highlights continued investor sensitivity to legal developments affecting high-profile tokens.

Despite the setback, many XRP holders remain optimistic that the Oregon lawsuit will ultimately hold little weight, given previous court rulings in Ripple’s favor.

Read also: XRP News: New Approach in XRPL Integration

Broader Crypto Implications

This move by Oregon may embolden other state regulators to pursue similar actions, especially if they perceive federal agencies as slow or unwilling to act. It also places renewed pressure on Congress to finalize national crypto legislation that can preempt conflicting state-level rulings.

With XRP once again in the spotlight, the case underscores the ongoing uncertainty around how digital assets are classified and regulated in the United States. 

The outcome could have lasting consequences not only for XRP and Coinbase but for the broader Web3 ecosystem.

FAQ

1. Why is XRP being called an unregistered security again?

Oregon’s Attorney General has filed a lawsuit alleging that XRP and 30 other tokens were sold by Coinbase without proper securities registration. This revives prior debates despite a 2023 ruling that said XRP wasn't a security in retail sales.

2. Didn't a judge already rule that XRP is not a security?

Yes. In 2023, a federal judge ruled XRP was not a security when sold on public exchanges to retail investors. However, the ruling did not universally clear XRP in all contexts, which state regulators like Oregon now appear to be testing.

3. What is Coinbase’s response to the lawsuit?

Coinbase has dismissed the lawsuit as “meritless” and a “copycat” of federal complaints. It argues the move undermines Congressional efforts to develop clear crypto regulation and plans to defend itself in court.

4. What could this mean for XRP holders?

If Oregon’s lawsuit gains traction, it could lead to temporary price volatility and renewed regulatory scrutiny of XRP and similar tokens. However, previous federal court victories for Ripple could provide a strong legal defense.