TL:DR
The SEC has admitted in the LBRY vs. SEC case that the sale of LBRY Credits (LBC) tokens on the secondary market does not qualify as a security. This ruling is seen as a big win for the cryptocurrency industry against the SEC’s overreaching regulation. Attorney John Deaton, who represented tech journalist Naomi Brockwell in the case, argued that LBC’s secondary market transactions were not securities. The judge agreed and clarified that the order does not apply to secondary market sales. The recent ruling could have implications for the ongoing securities lawsuit between the SEC and Ripple.
The SEC Settles with LBRY
The United States Securities and Exchange Commission (SEC) has admitted in a recent hearing that the sale of LBRY Credits (LBC) tokens on the secondary market does not qualify as a security. The ruling came during the appeal hearing in the LBRY vs. SEC case on January 30, 2023 and is seen as a big win for the cryptocurrency industry against the SEC’s overreaching regulation.
In November 2022, the SEC was awarded summary judgment in its favor, categorizing each sale of the LBC token during a six-year period as an investment contract. The SEC hoped to gain legitimacy in the secondary market and bring it under its purview as well. However, the injunction was found to be ambiguous and broad by Attorney John Deaton, who represented tech journalist Naomi Brockwell as an amicus curiae.
Deaton cited a paper by commercial contract attorney Lewis Cohen that examined all security lawsuits in the US since the SEC vs. W.J. Howey Co case. No court acknowledged that the underlying asset was security at any point throughout Cohen’s examination of security cases in the US. Deaton argued that LBC’s secondary market transactions were not securities and the judge agreed, clarifying that the order does not apply to secondary market sales.
The Ruling
The ruling in the LBRY case is seen as a relief for many in the crypto community, especially XRP holders who are currently facing a securities lawsuit from the SEC over the sale of XRP tokens. The recent ruling that LBC token sale in the secondary market does not qualify as a security could work in favor of the long-running Ripple lawsuit. Some believe that the recent ruling could force a settlement in the Ripple lawsuit.
Overall, the recent ruling in the LBRY vs. SEC case is a major victory for the cryptocurrency industry and could have implications for other ongoing lawsuits between the SEC and crypto companies. The crypto community has praised Attorney John Deaton for his continuous efforts to fight against the SEC’s overreach and for being actively involved in the Ripple lawsuit.
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