The sale of LBRY Credits (LBC) tokens in the second hand market does not count as the sale of a security, the United States Securities and Exchange Commission (SEC) has publicly acknowledged. The agreement was reached on January 30 during an appellate level in the LBRY v. SEC case.
Attorney John Deaton resolved a significant point of contention at the appeal hearing, which many viewed as a victory for the whole cryptocurrency industry against the SEC's overreaching regulation via compliance. On November 7, 2022, the SEC was given summary judgment in its favor. The verdict, which covered a six-year period, classified each purchase of the LBC token as an investment without going into details about the transactions. The SEC hoped to make progress in its mission to legitimize the secondary market and bring it under its jurisdiction. The SEC has requested the district court judge in New Hampshire to uphold the broad, confusing order forbidding its sale.
Deaton sought clarification for LBC secondary trading activity because he thought the ban was vague and overbroad as an amicus curiae representing tech journalist Naomi Brockwell. An amicus curia is a person or group that is not a party to a lawsuit but is allowed to support a court by providing data, knowledge, or insight that is relevant to the case's problems. Deaton highlighted a report by commercial contract lawyer Lewis Cohen that looked at every security case filed in the United States since SEC v. W.J. Case of Howey Co. Throughout Cohen's analysis of security cases in the United States, no court admitted that the underlying value was protection at any stage.
The judge was convinced by Deaton that LBC's secondary market activity weren't bonds. In an attempt to prevent giving explanation for LBC, the SEC requested an action that does not distinguish between LBRY, the company's business, and users. “Amicus, I'm going to make it clear that my order does not apply to secondary market sales,” the judge said, turning to face Deaton.
Many people in the cryptocurrency world, notably owners of XRP, felt relieved by the court's decision in the case. The SEC has filed a securities complaint against Ripple for the sale of XRP tokens. The long-running Ripple litigation may profit from the current decision suggesting that the secondary market selling of LBC tokens does not classify as a security. A pro-XRP Twitter account claimed that the decision also qualifies XRP as a non-security.
Another commenter speculated that the current decision would compel a resolution to the Ripple case and said:
“Thats going to kill the sec court case against XRP could this force a settlement？”
Others commended Deaton for his ongoing efforts to combat the SEC's overreach because he has assumed a prominent role in the Ripple litigation.
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