U.S. District Court Hesitates on LBRY Secondary Crypto Sales Decision
Ripple may be holding its breath a bit longer after a United States District Judge refused to rule on if the secondary sale of LBRY Credits (LBC) constitutes security.
On July 11, New Hampshire District Court Judge Paul Barbadoro made the ruling in the case the United States Securities and Exchange Commission (SEC) brought against the decentralized content platform LBRY.
A Potential Precedent for Ripple’s SEC Case
The ruling could have offered a legal precedent to fellow District Court Judge Analisa Torres, who is set to make a decision on the SEC’s case against Ripple in the coming months.
Judge Barbadoro stated, “Accordingly, I take no position on whether the registration requirement applies to secondary market offerings of LBC.”
A secondary market is where traders buy and sell securities, while a primary market involves trading from the company issuing the security directly.
John Deaton Seeks Clarity on LBC’s Status as a Security
John Deaton, a U.S. lawyer representing thousands of XRP token holders, tweeted on July 11 that he contacted Judge Barbadoro to seek clarity on if LBC constituted security. The judge decided to uphold his “judicial restraint.”
From January Appeal to Current Position: A Shift in Judge Barbadoro’s Stand
This is a shift from Judge Barbadoro’s opinion in a January appeal hearing, where Deaton persuaded him that the secondary sale of LBC doesn’t constitute a securities offering. He clarified in the appeal hearing that LBC is only considered security when the sale is made directly.
SEC’s Stance on LBRY’s Secondary Sales
The SEC also admitted that secondary market LBC sales don’t constitute security. However, the SEC won a summary judgment in November 2022, and settled for $22 million at an appeal hearing on Jan. 30. In May, the SEC revised the figure to $111,000 citing LBRY’s “lack of funds and near-defunct status.”
Ripple’s Fate in the Hands of Judge Torres
Meanwhile, Jeremy Hogan, a U.S.-based Attorney and Ripple advocate, stated that District Court Judge Analisa Torres will likely lay out her ruling within the next couple of months. He believes the details of the case will be revealed by the end of the year and may result in long-drawn-out appeals if they are unfavorable for Ripple.
This, however, “won’t really matter for a typical XRP holder,” he added.