The United States Securities and Exchange Commission (SEC) has officially admitted that the sale of LBRY Credits (LBC) tokens in the secondary market does not constitute a security. The settlement came during an appellate hearing in LBRY v. SEC on January 30.
LBRY Hearing: The Stakes for ALL Crypto https://t.co/YPbrBkw0Od
—CryptoLaw (@CryptoLawUS) January 30, 2023
In what many called a victory for the entire crypto industry against the SEC’s overreaching regulation through law enforcement, attorney John Deaton settled an important debate during the appeal hearing.
The SEC obtained summary judgment in its favor during the hearing on November 7, 2022. The judgment categorized each sale of the LBC token over a period of six years as an investment contract without going into detail about the details of the transactions.. The SEC hoped to advance its effort to gain legitimacy in the secondary market and bring it under its purview as well. The SEC has asked the New Hampshire district court judge to uphold the broad and ambiguous injunction prohibiting its sale.
Deaton, who represented technology journalist Naomi Brockwell as amicus curiae, was seeking clarity for LBC’s secondary market transactions because he considered the injunction ambiguous and broad.. An amicus curiae is a person or organization that is not a party to a judicial proceeding, but that is authorized to assist a court by offering information, experience, or knowledge related to the issues in the case.
Deaton cited a document by commercial contracts attorney Lewis Cohen examining all US securities lawsuits since the SEC v. WJ Howey Co. No court recognized the underlying asset as a security at any time in its lifetime. from Cohen’s examination of securities cases in the United States.
Deaton convinced the judge that LBC’s secondary market transactions were not securities. The SEC sought an order not to distinguish between LBRY, company management, and users, in an effort to prevent the LBC case from being cleared up. The judge turned to Deaton and said, “amicus, I’m going to make it clear that my order does not apply to secondary market sales.”
The ruling in the case came as a relief to many in the cryptocurrency community, especially XRP holders. Ripple is currently facing a securities lawsuit from the SEC over the sale of XRP tokens. The recent ruling that the sale of LBC tokens on the secondary market does not qualify as securities may work in favor of Ripple’s longstanding lawsuit. A pro-XRP Twitter account said that the ruling makes XRP also not a security.
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
If the SEC admitted that LBRY is not a security, then they know for a fact that XRP is definitely not a security.
Another user suggested that the recent ruling could force a settlement in the Ripple lawsuit and said:
“That’s going to kill the court case against XRP, could this force a resolution?”
Others praised Deaton for his continued work to fight SEC overreach, as he has been actively involved in the Ripple lawsuit.
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