A New Hampshire district court judge has clarified that a security injunction issued earlier in the legal battle between the US Securities and Exchange Commission (SEC) and decentralized content sharing and publishing platform LBRY was it applied only to direct sales of project tokens.
The ruling came during an appeal hearing on January 30, 2023, resolving a longstanding debate between the SEC and the crypto community.
Judge clarifies ruling in LBRY v. sec
The court initially ruled in favor of the SEC in November 2022, granting the commission’s request for summary judgment filed in May 2021.
crypto potato reported that the SEC sued LBRY in March 2021, alleging that the platform was selling its native LBRY Credit (LBC) token, as an unregistered security.
The agency argued that the blockchain platform raised more than $11 million in cryptocurrency and cash from investors between 2016 and 2021. The regulator found the LBC token sale to be an investment contract and classified it as a security.
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 conduct any initial coin offerings (ICOs).
During the appeal hearing yesterday the SEC asked the judge to clarify the first ruling, as it sought to prohibit the sale of LBC. Interestingly, the tides turned when the judge explained that the injunction only applied to direct token sales.
In particular, the ruling was greatly influenced by the efforts of attorney John Deaton, who was present as amicus curiae.
A potential win for Ripple?
Deaton cited an article by attorney Lewis Cohen, which evaluated all the security claims that have arisen in the US since the creation of the Howey test. The documents revealed that no court recognized an underlying asset as a security.
As Deaton’s persuasion surfaced, the judge turned to him and said, “Amicus, I’m going to 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 be useful for Ripple in its ongoing case against the SEC.
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