LBRY: SEC Loses Lawsuit – Will XRP Benefit Now?

The SEC had hoped to confirm its injunction at a hearing after actually winning in November last year. But the judges made it clear that the judgment only applies to direct sales. At an appeal hearing on January 30, 2023, it was confirmed that the sale of LBRY Credits (LBC) tokens on the secondary market is not a security. This decision was hailed as a victory for the crypto industry against over-regulation by the SEC . Attorney John Deaton triggered an important debate.

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SEC settles lawsuit in LBRY case

SEC has now lost a case in which any sale of LBC tokens over a six-year period was still classified as an investment contract in November last year. This should be part of the SEC’s effort to legitimize the secondary market and bring it under its jurisdiction. The SEC asked the New Hampshire District Court judge to confirm a sweeping injunction prohibiting the sale of the token.

John Deaton, acting as amicus curiae on behalf of tech writer Naomi Brockwell, fought for clarity on the LBC aftermarket transactions. As Counsel, he provided the court with information and insight relevant to the decision of the case. Deaton cited a study by commercial contracts attorney Lewis Cohen. Cohen had investigated every securities lawsuit in the US since the SEC vs. WJ Howey Co. case. Cohen’s study found that no court had ever recognized that the underlying asset was a security.

Big Victory for Crypto – and XRP in particular?

Attorney John Deaton has successfully argued in court that the secondary market transactions of LBC tokens do not constitute securities. The SEC sought a broad injunction, but the judge corrected it to clarify that it does not apply to sales in the secondary market.

This decision is being hailed as a victory for the crypto industry and specifically for XRP holders. XRP is currently facing a securities lawsuit from the SEC. The ruling that the sale of LBC tokens on the secondary market does not constitute securities could have implications for the Ripple-SEC litigation that has been ongoing since 2020.