Judge clarifies that security order in LBRY v. SEC only applied to direct sales

Judge clarifies that security order in LBRY v. SEC only applied to direct sales

A New Hampshire District Court judge has clarified that an injunction previously issued in the litigation between the United States Securities and Exchange Commission (SEC) and decentralized content sharing and publishing platform LBRY only applied to the direct sale of the project's tokens.

The ruling came during an appeal hearing on January 30, 2023, ending a century-long debate between the SEC and the crypto community.

Judge Clarifies Decision in LBRY v. SEC

The court initially ruled in favor of the SEC in November 2022 and granted the Commission's motion for summary judgment filed in May 2021.

CryptoPotato reportedthat the SEC sued LBRY in March 2021, claiming the platform was selling its native token LBRY Credit (LBC) as an unregistered security.

The agency argued that the blockchain platform generated over $11 million from 2016 to 2021.

However, LBRY insisted that LBC was not a security as millions of people were active on the platform before tokens were issued. The project also noted that it did not include an initial coin offering (ICO).

During the Appeal hearing Yesterday, the SEC asked the judge to clarify the first ruling as it appeared to prohibit the sale of LBC. Interestingly, the tides changed when the judge declared that the injunction only applied to direct token sales.

Notably, the ruling was heavily influenced by the efforts of attorney John Deaton, who was present as amicus curiae.

A possible win for Ripple?

Deaton cited a paper by attorney Lewis Cohen that evaluated all security lawsuits that have arisen in the U.S. since the Howey test was introduced. The documents showed that no court recognized any underlying asset as security.

As Deaton's persuasion broke to the surface, the judge turned to him and said, "Amicus, I will make it clear that my order does not apply to secondary market sales."

The new development is a big win for the crypto community and could help Ripple in its ongoing case against the SEC.

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