SAN FRANCISCO — Fintech company Ripple Labs is facing a new lawsuit alleging that it has been conducting a “never-ending initial coin offering” in violation of securities laws. But though there may be ICO litigation aplenty nowadays, this is not your typical case.

The lawsuit, filed in San Francisco Superior Court, comes after chatter on social media about whether the tokens developed by Ripple—called XRP tokens or “Ripples”—are actually unregistered securities. That idea suddenly seemed to gain more traction after Gary Gensler, a former top financial regulator, told The New York Times he believed Ripple and Ether were probably both issued in violation of securities laws.

“There is a strong case for both of them—but particularly Ripple—that they are noncompliant securities,” Gensler told the Times last month.

Ripple Labs is also not just another blockchain project. It is a large and relatively established fintech company headquartered in San Francisco that focuses on international money transfers in the banking sector. According to the website CoinMarketCap.com, XRP is the third-largest cryptocurrency in the world behind Bitcoin and Ether.

In light of that scale, the case filed on May 3 could have big consequences, some attorneys say. “The Ripple class action lawsuit creates a danger to the continued development of innovative blockchain-based currencies, given the potential of such private litigation to create uncertainty within the developing cryptocurrency markets,” said Michael Dicke of Fenwick & West, a former SEC enforcement official.

Until now, litigation over ICOs has generally fallen into two categories: SEC enforcement actions over seemingly outright scams, and civil securities litigation over so-called “token presales”—ICOs that were conducted by blockchain startups before they had an operational software product, as a way to raise capital for the enterprise.

The Ripple scenario doesn't fall into either of those buckets. XRP tokens were created by the company's co-founders as a digital currency. Unlike Bitcoin and Ether, XRPs are not “mined” by enthusiasts, since all 100 billion of them already exist. They are also held by a relatively small number of people—a factor that could come into play under the securities laws.

Part of the so-called “Howey Test” that courts have used to determine whether something is a security involves assessing whether investors expect to make a return from the “efforts of others.” The complaint filed against Ripple Labs argues that the company maintains a “centralized XRP” ledger, and has been making profits off of increases in the cryptocurrency's price.

A report by Forbes said that Ripple Labs holds 61 percent of the cryptocurrency, and the crypto transparency project “Are We Decentralized Yet” says that 98 percent of the tokens are held by the top 100 accounts. That contrasts sharply with Bitcoin, of which only 18 percent is held by the top 100 accounts. (That concentration of the crypto-value helps explain why Ripple co-founder Chris Larsen was declared one of the world's richest men during the run-up in the value of cryptocurrencies across the board last winter.)

“I think the fact that there's a concentration is really important,” said James Taylor-Copeland, the solo securities lawyer in San Diego who filed the case. “Ripple at present doesn't seem to be used by its holders for much of anything except for speculation on its price increasing, based on the work that Ripple maintains that it continues to do on the Ripple network.”

The company, unsurprisingly, is pushing back. “Whether or not XRP is a security is for the SEC to decide,” a company spokeswoman said in response to the complaint. “We continue to believe XRP should not be classified as a security.”

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Taylor-Copeland is also suing the entities behind the Tezos project over their $232 million ICO last summer, in what appeared to be the first civil class action filed over an ICO in the United States. Previously an attorney at Mintz, Levin, Cohn, Ferris, Glovsky and Popeo and Clifford Chance, his Taylor-Copeland Law now specializes in cryptocurrency litigation.

It's noteworthy that Taylor-Copeland filed both cases in state court. The U.S. Supreme Court recently ruled in Cyan v. Beaver County Employees Retirement Fund that state courts maintain jurisdiction over class actions brought under the federal Securities Act of 1933.

The important difference is that, in state court, there is not an automatic stay of discovery in securities cases—unlike in federal court, where a stay remains in place until the case has survived a motion to dismiss.

“It's definitely Cyan rearing its head,” said Dicke of Fenwick & West. “You're not going to get any of the protections of the [Private Securities Litigation Reform Act] that would restrain discovery in federal court.”

Also in play are reports that Ripple tried to buy its way onto cryptocurrency exchanges Gemini and Coinbase in exchange for millions of dollars worth of XRP tokens or cash.

Ripple hasn't exactly denied those allegations. “Ripple has always been transparent about our focus on building and growing a strong XRP ecosystem,” the spokeswoman said. “We want XRP to be the most liquid digital asset possible to enable faster, cheaper global payments.”