The US Securities and Exchange Commission admitted that the sale of tokens in the secondary market are not considered as securities.
On January 30th, an appeal hearing was conducted and the United States Securities and Exchange Commission (SEC) has publicly stated that the selling of LBRY (LBC) tokens on secondary markets does not constitute the sale of a security.
Attorney John Deaton put an end to a critical topic during the appeal hearing, which many people celebrated as a victory for the whole cryptocurrency industry in its struggle against the SEC’s regulation by enforcement. The conclusion determined by the court establishes a precedent that has the potential to affect not only the way in which regulators view blockchain-based platforms, but also cryptocurrencies.
About LBRY
LBRY, Inc. is a company that has developed an open-source, decentralized platform for distributing, discovering, and trading of digital content like videos, music, games, etc. LBRY uses blockchain technology to provide a platform for content creators to publish and monetize their work, with the goal of creating a more open and equitable system for content distribution. The platform is run by its users, with no central authority controlling access or determining what content can be published. LBRY uses its native cryptocurrency, LBRY Credits (LBC), as a means of exchange for content on the platform.
The United States Securities and Exchange Commission (SEC) filed charges against LBRY, Inc. on March 29, 2021, accusing the company of marketing unregistered digital asset securities. The US SEC asserted that LBRY, Inc. had violated securities laws by selling LBRY credits (LBC) to support their operations without first registering those sales with the SEC. In response, the CEO of LBRY initiated a public relations campaign in an effort to garner support from supporters of blockchain technology and cryptocurrencies and to argue that the SEC had incorrectly classified LBC as a security. The case was decided in favor of the SEC on November 7, 2022, when Judge Paul Barbadoro of the United States District Court for the District of New Hampshire approved the SEC’s petition for summary judgment. The SEC was declared the victor in the case.
What could this mean for the Ripple lawsuit?
Ripple is currently in a legal battle with the SEC regarding the sale of XRP. The latest judgment suggests that the selling of LBC tokens on secondary markets does not qualify as securities may work in favor of Ripple in the ongoing dispute that the company is involved in.
Final Thoughts
The US SEC has been criticized by some members of the cryptocurrency industry and proponents of digital assets for not providing clear and comprehensive regulatory guidance for the sector. Some argue that the lack of clear regulations and the SEC’s tendency to take enforcement action against companies rather than providing clear guidelines leaves the industry uncertain and creates a barrier to innovation.
The US SEC is determined to have all crypto tokens categorized as securities; nevertheless, this mentality will ultimately be their downfall. The LBRY lawsuit is currently the center of everyone’s attention, and it appears that the company emerged victorious from this legal battle. Due to the way the token is constructed, the judge determined that it cannot be considered a security.
In the event that the SEC goes after businesses or the cryptocurrency market as a whole, these things will serve as a benchmark for legitimate companies on how to fight back.