SEC vs. LBRY judge determines secondary LBC sale as not security

In a lawsuit filed by the U.S. Securities and Exchange Commission (SEC) against the decentralized publishing platform LBRY Inc., the court decided that the secondary sale of LBRY Credits, or LBC, did not constitute the sale of a security.

The finding was part of an appeal filed by the SEC on January 30, ostensibly to seek an injunction against secondary sales.

The SEC filed a lawsuit against LBRY in March 2021, stating that the company generated $11 million via the sale of unregistered securities, the LBC token. The court ruled in favour of the SEC and classed the first sale of LBC tokens as investment contracts on November 7 of last year.

During Monday’s hearing, the SEC requested that the court explain the first judgement in order to restrict any LBC token sales.

The court said that the prior judgement only related to the direct sale of the token and not to secondary transactions, as argued by attorney John Deaton, who represented tech writer Naomi Brockwell as amicus curiae in the case.

Deaton referenced a report by attorney Lewis Cohen that studied all U.S. security disputes since the Howey Test was created. The research demonstrated that no court has recognized a fundamental asset as a security.

According to Deaton’s tweet, the court said that his ruling does not extend to secondary market purchases and that he would not give the injunction requested by the SEC, which presumably encompassed secondary market sales.

LBC increased 35.9% in the 24 hours before 12:30 a.m. Hong Kong time, trading at US$0.016. XRP, the coin on the Ripple Labs network that is also being sued by the SEC, climbed 0.94 percent to trade at $0.40, according to statistics from CoinMarketCap.

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