BREAKING: SEC Accepts That Sale Of LBC Token Is Not A Security In Secondary Markets• February 2, 2023 5:11 pm • Comments
The SEC just admitted that sales of LBRY credits (LBC) tokens on the secondary market are not considered securities which was a big win for the crypto community.
Previously, the SEC had won the prior case where the judge ruled that the sale of the LBC token was considered a security for direct sales.
That judgement had set the crypto industry back a bit and caused some investors to be concerned about the possible outcome of the Ripple vs SEC case due to the similarity between the two cases.
However, with this new ruling, the fact that it is not considered a security on the secondary markets will likely help to strengthens Ripple’s case that XRP is not a security.
The key thing to note here is that John Deaton was able to get the SEC to admit on record that the LBRY token itself is not a security.
With this being on record, it will be hard for the SEC to backtrack on what it has said which will provide Ripple with enormous evidence for its own case.
First word from the SEC v. LBRY hearing:
The SEC admitted on the record that the token itself is not a security.
Good job Mr. Deaton! https://t.co/tRXIQs5SSu
— Jeremy Hogan (@attorneyjeremy1) January 30, 2023
Deaton persuaded the judge that LBC’s secondary market transactions were not securities. The SEC requested an order that does not make a distinction between LBRY, the company’s management, and users in an effort to avoid providing clarification for LBC.
The judge turned to Deaton and told him: “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 for many in the crypto community, especially
XRP holders. Ripple is currently facing a securities lawsuit from the SEC over the sale of XRP tokens.
The recent ruling that indicates LBC token sale in the secondary market doesn’t qualify as securities can work in favor of the long-running Ripple lawsuit. A pro-XRP Twitter account said the ruling makes XRP a non-security as well.
Another user suggested the recent ruling could force a settlement in the Ripple lawsuit and said:
“That’s going to kill the sec court case against XRP could this force a settlement?”
At this point, many are predicting that the case between Ripple and the SEC will likely reach a settlement as more and more cases are pointing towards Ripple’s favor.
After all, if the court decides that XRP is a security, it would likely contradict the ruling of this case and indicates that the SEC’s logic is inconsistent.
Currently, the categorization of XRP passes the Howey test which is a method that is used by courts to classify whether or not an asset is a security.
Given the similarities between LBRY and XRP, it is also expected that XRP should receive the same ruling in this case where the asset was defined to not be a security.
John Deaton continues to share more details regarding the case and shares the recording where the SEC admits this on Twitter.
This is a significant example of why Monday’s @LBRYcom hearing was so important. The Judge’s summary judgment decision implied that ALL #LBC sales violate Section 5. The Judge stated that he will make clear that his decision does NOT apply to secondary sales and only LBRY’s. https://t.co/6KQYCSC7Do
— John E Deaton (@JohnEDeaton1) February 1, 2023
Deaton believed that the injunction was ambiguous and broad. As an individual that is not a party to the case but is permitted to assist a court by offering information and expertise, Deaton cited a paper by commercial contract attorney Lewis Cohen that examined all security lawsuits in the U.S. 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’s argument persuaded the judge that LBC’s secondary market transactions were not securities.
The SEC requested an order that does not make a distinction between LBRY, the company’s management, and users who purchased LBC in the secondary market. 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.
Absolute 🔥🔥🔥#CryptoLawTV @JohnEDeaton1 @LBRYcom @jeremykauffman a fight to the end!! Grateful for all of you. #RETWEET #XRPArmy
The #SEC asked what can we do to get into compliance even if we've lost. The SEC refused to answer pic.twitter.com/Zvboh4gEKT
— LBRY Community 🚀 (@LBRYcoms) January 31, 2023
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