SEC Loses Appeal in LBRY Vs. SEC
The United States Securities and Exchange Commission (SEC) has acknowledged publicly in the public record that the secondary market sale of LBRY Credits (LBC) tokens does not constitute the sale of a security. On January 30, an appeal hearing was held in the case LBRY vs. SEC. The settlement was reached at that hearing.
During the appeal hearing, Attorney John Deaton put an end to a key discussion, which many people hailed as a triumph for the whole cryptocurrency sector in its fight against the SEC's overreach regulation by enforcement.
During the hearing that took place on November 7, 2022, the SEC was granted a summary judgement in its favour. The court's decision characterised every sale of LBC tokens that took place over a period of six years as an investment contract, but it did not go into more detail about the particulars of each transaction. The Securities and Exchange Commission (SEC) had high hopes that it could progress its campaign to obtain credibility in the secondary market and bring it within its supervision at the same time. The Securities and Exchange Commission has requested that the judge of the district court in New Hampshire uphold the broad and vague injunction that prohibits the company's sale.
Because he believed the injunction to be too wide and imprecise, Deaton, who was acting in the capacity of amicus curiae for tech journalist Naomi Brockwell, pushed for clarification about secondary market transactions for LBC. An amicus curiae is a person or organisation that is not a party to a legal case but is authorised to assist a court by providing information, expertise, or insight that is relevant to the issues that are being litigated in the case. This can be done in order to shed light on the circumstances surrounding the case.
A study written by commercial contract attorney Lewis Cohen that studied all security litigation filed in the United States since the SEC vs. W.J. Howey Co case was mentioned by Deaton. During the course of his investigation into security matters in the United States, Cohen came across not a single instance in which a judge admitted that the underlying asset was security.
Deaton was successful in arguing to the court that LBC's transactions on the secondary market did not include securities. In an attempt to circumvent the need to provide clarity for LBC, the SEC submitted a request for an order that draws no distinctions between LBRY, the management of the firm, and its users. The court then addressed Amici as follows: "amicus, I'm going to make it plain that my order does not extend to secondary market sales." The judge then turned to face Deaton.
The decision in the lawsuit provided a sense of comfort for many members of the cryptocurrency community, particularly owners of XRP. Ripple is now being sued by the Securities and Exchange Commission (SEC) on the selling of XRP tokens. The new judgement that shows the selling of LBC tokens on secondary markets does not constitute as securities may work in favour of Ripple in the protracted case that they are currently engaged in. According to a Twitter account that supports XRP, the judgement also classifies XRP as a non-security.