In a recent outcome, LBRY, a decentralized peer-to-peer payment network, scored a victory over the United States Securities and Exchange Commission (SEC) in the lawsuit related to the LBC token.
The district court recently gave a ruling that LBC sales in the secondary market cannot be categorized as securities offerings as alleged by the SEC. Accordingly, members of the XRP community are more confident Ripple could also win the securities agency in the ongoing XRP lawsuit.
Recall that the SEC, who claims that all altcoins including XRP are unregistered securities, filed a lawsuit against LBRY, arguing that the project’s native token LBC is an unregistered security offering. The case which lasted for several months finally ended last November with the SEC as the winner. LBRY lost as the presiding judge ruled that the LBC token is an investment contract.
This was a huge blow to the developing cryptocurrency industry as it further boosted the Gary Gensler-led regulatory agency’s confidence to push its agenda of achieving crypto regulations by enforcement. Especially after it became understandable that the U.S. Congress will issue no legislative framework for the crypto industry until 2025, according to the Cardano founder Charles Hoskinson.
LBRY recently gains a victory over the SEC
The district court recently clarified that the November ruling it gave in the LBC lawsuit where the SEC is the plaintiff and LBRY the defendant does not include the secondary market sales of LBC. This verdict comes after the SEC requested the district court judge for New Hampshire to issue an injunction that would restrict the sale of LBC.
Anyone enjoying themselves exchanging some non-securities on secondary markets today?
— LBRY 🚀 (@LBRYcom) February 1, 2023
John Deaton, the attorney representing over 75k XRP holders in the prevailing Ripple vs SEC lawsuit, helped in this victory achieved by the LBRY team. Deaton played a major part as he explained clearly why LBC secondary market sales cannot be recognized as securities, presenting his facts before the judge.
Particularly, the founder of Crypto Law argued that the SEC failed to distinguish between the LBRY’s management, users, and the token. Deaton centered his arguments around previous lawsuits filed by the SEC, referring to a document written by Lewis Cohen, a commercial contract attorney. In this paper, Cohen analyzed all the security lawsuits filed in the United States that emerged after the SEC vs. Howey lawsuit.
John Deaton noted that the SEC lost all of these lawsuits as all the associated crypto assets didn’t fit into the security category but were seen as commodities by the court. It was after the court hearing of Deaton’s argument that the district court judge ruled that the order given in November does not include secondary market sales.
Ripple’s chances to win the SEC increases
Following this LBRY vs SEC case development, Ripple now stands a better chance at defeating the SEC in their two-year-long court battle over XRP. Several members of the XRP community have also shown their excitement toward the judge’s clarification on the LBC token sales. Attorney Jeremy Hogan noted that the SEC admitted on the record that the LBC token itself is not a security, applauding John Deaton for his expertise.
Takeaways:
1. The @SECGov lawyers in the @LBRYcom case conceded OTR that secondary market sales of $LBC tokens do not constitute a security.
2. No one fights harder for the crypto community than @JohnEDeaton1. Imagine how easy the SEC would have it if it weren’t for him? https://t.co/ad9xOGDfeN
— Eleanor Terrett (@EleanorTerrett) January 30, 2023
Meanwhile, a certain member of the XRP community noted that the recent outcome counters the SEC’s claims on XRP, adding that it could force the U S. securities watchdog to settle with Ripple Labs and its two executives. But John Deaton who had earlier expressed assurance that the XRP lawsuit would not end just like the LBC lawsuit also stated that there will be no settlement in the Ripple-SEC case but a court ruling.
Meanwhile, Ripple CEO Brad Garlinghouse who disclosed that the XRP lawsuit would be around mid-2023 pinpointed what could make Ripple agree to a settlement with the SEC.
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