A United States district court judge has declined to rule on whether the secondary sale of LBRY Credits (LBC) constitutes a security, potentially setting a precedent for a similar case involving Ripple. The ruling, delivered by Judge Paul Barbadoro of the US District Court for the District of New Hampshire, pertained to the lawsuit filed by the United States Securities and Exchange Commission (SEC) against decentralized content platform LBRY. This decision has raised speculation on the implications it may have for the ongoing SEC versus Ripple case.
Background
The LBRY case, argued by lawyer John Deaton, sought to establish that secondary sales of LBC tokens should not be classified as securities offerings. While Judge Barbadoro refrained from delivering a conclusive judgment on the matter, his ruling could provide guidance to Judge Analisa Torres, who is presiding over the SEC’s case against Ripple.
The Court’s Decision
Judge Barbadoro expressed his neutrality on the registration requirement for secondary market offerings of LBC, stating that he would not take a position on the matter. The distinction between primary and secondary markets was highlighted, with primary markets involving direct trading from the company issuing the security and secondary markets encompassing traders buying and selling securities.
Implications for Ripple
According to Cointelegraph, the LBRY ruling holds implications for the upcoming decision in the SEC versus Ripple case. Ripple’s fate may depend on Judge Torres’ interpretation of the ruling and its potential influence on the classification of XRP.
Notably, Judge Barbadoro’s latest stance represents a reversal from his previous conclusion in January, where Deaton convinced him that secondary sales of LBC did not constitute securities offerings. During the appeal hearing, it was clarified that LBC is only considered a security when sold directly, which the SEC also acknowledged.
Settlement and Revised Penalties
After obtaining a favorable summary judgment in November 2022, the SEC made the decision to resolve the matter by agreeing to a $22 million settlement during the appeal hearing held in January. However, later on, the SEC adjusted the fine to $111,000, citing the financial situation of LBRY. Currently, the court is anticipated to render a verdict regarding the penalty in the coming days.
Insights from Legal Experts
Legal experts closely following the Ripple case, such as US-based attorney and Ripple advocate Jeremy Hogan, anticipate that Judge Torres will issue her ruling within the next few months. Hogan suggests that a comprehensive understanding of the case’s implications will emerge soon, and unless Ripple secures a complete victory, the details of the ruling will be known before the end of the year. Any unfavorable details may result in prolonged appeals.
Final Thoughts
The recent LBRY ruling by Judge Barbadoro has added a new layer of complexity to the ongoing SEC versus Ripple case. While the judge refrained from explicitly categorizing secondary sales of LBC as securities, his decision could influence Judge Torres’ ruling on the SEC’s case against Ripple. Ripple’s fate remains uncertain, and the coming months will be crucial in determining the outcome of the lawsuit. Regardless, the implications of these rulings extend beyond Ripple and have the potential to shape the regulatory landscape for cryptocurrencies and their secondary market transactions.