The US Securities and Exchange Commission (SEC) has officially admitted that the sale of LBRY Credits (LBC) tokens on the secondary market does not constitute an offering of securities. The agreement was reached yesterday during the appeal hearing of the LBRY case against the SEC.
LBRY Hearing: The Stake for All Cryptocurrencies
LBRY Hearing: The Stakes for ALL Crypto https://t.co/YPbrBkw0Od
— CryptoLaw (@CryptoLawUS) January 30, 2023
In what many are calling a victory for the entire cryptocurrency industry against excessive regulation by the SEC, attorney John Deaton settled an important debate during the appeals hearing.
The SEC obtained a summary judgment in its favor during its hearing on Nov. 7, 2022. The ruling classified each sale of the LBC token during a six-year period as an investment contract, without going into specific transaction details. The SEC hoped to advance its effort to gain secondary market legitimacy and to do so this aspect also falls within its sphere of competence. The SEC asked a New Hampshire district court judge to uphold the broad and ambiguous injunction prohibiting the sale.
Deaton, who represented tech journalist Naomi Brockwell as amicus curiae, attempted to clarify LBC’s secondary market transactions, deeming the injunction ambiguous and generic. An amicus curiae is an individual or organization who is not a party to the case, but who can assist a court by offering information, expertise or insights that pertain to the issues in the case.
Deaton cited a paper by commercial contracts attorney Lewis Cohen, who has reviewed all securities lawsuits in the United States since the SEC v. WJ Howey Co case. No court has ever recognized that the underlying asset was a security throughout Cohen’s examination of cases involving alleged securities offered in the United States.
Deaton convinced the judge that the LBC’s secondary market transactions were not to be considered stock exchanges. The SEC has requested an order that does not distinguish between LBRY, company management and users in an effort to avoid clarifying LBC. The judge turned to Deaton and said: “Amicus, I will clarify that my order does not apply to secondary market sales.”
The case ruling came as a relief to many users of the crypto community, especially for XRP holders. In fact, Ripple is currently facing a similar unregistered securities offering lawsuit from the SEC. The recent ruling indicating that the sale of LBC tokens on the secondary market does not qualify as an offering of securities may play in favor of the long-running lawsuit filed against Ripple. A pro-Ripple Labs Twitter account said the ruling also makes XRP a “non-security.”
If the SEC has admitted that LBRY is not a stock, then it knows for a fact that #XRP is definitely not one either.
If the SEC admitted LBRY isn’t a security then they know for sure that #XRP is definitely not a security
— XRPcryptowolf (@XRPcryptowolf) January 30, 2023
Another user suggested that the recent ruling could force a settlement in the Ripple lawsuit, reiterating:
“This Will Settle The Sec’s Lawsuit Against XRP: Could It Lead To A Settlement?”
Others have praised Deaton for his continued work fighting SEC abuse, considering he was actively involved in the Ripple lawsuit.
