The sale of LBRY Credits (LBC) tokens in the secondary market do not count as the sale of a security, the United States Securities and Exchange Commission (SEC) has publicly acknowledged.
In the LBRY v. SEC lawsuit appeal hearing on January 30, the deal was made. Many saw the settlement of a crucial point of argument by attorney John Deaton at the appeal hearing as a victory for the whole crypto industry versus the SEC’s overly broad regulation through enforcement.
The SEC received summary judgement in its favour on November 7, 2022. Without getting into specifics about the transactions, the judgement, which spanned a six-year period, categorized each sale of the LBC token as an investment contract. The SEC planned to advance in its goal of establishing the secondary market’s legitimacy and bringing it under its purview. The SEC has asked the New Hampshire district court judge to uphold the wide, ambiguous injunction prohibiting its sale.
Deaton, who served as an amicus curiae for tech journalist Naomi Brockwell, requested clarification regarding LBC secondary market transactions since he thought the injunction was vague and broad. An amicus curia is a person or group that isn’t a party to a lawsuit but is nevertheless allowed to support the court by providing data, knowledge, or insight that is relevant to the case’s issues.
Deaton highlighted a report by commercial contract lawyer Lewis Cohen that looked at every security action brought in the US since the SEC vs. W.J. Howey Co case. Throughout Cohen’s investigation of security cases in the US, no court ever accepted the underlying asset as security.
LBC’s secondary market transactions were not securities, according to Deaton, who persuaded the judge of this. To avoid providing an explanation for LBC, the SEC asked for an order that does not distinguish between LBRY, the company’s management, and users. Deaton was facing the judge when he said, he is going to make it clear that his order does not apply to secondary market sales.
Many people in the cryptocurrency community, especially holders, were relieved by the decision in the case. For the sale of XRP tokens, the SEC has filed a securities case against Ripple. The recent ruling stating that the secondary market sale of LBC tokens does not qualify as a security may be advantageous for the ongoing Ripple case. A pro-XRP Twitter account claimed that the decision also qualifies XRP as a non-security.
