This week, the Securities and Exchange Commission won another triumph over a crypto project where it has considered a token to be a security. This has raised concerns about its battle with fintech firm Ripple.
A New Hampshire district court ruled against the decentralized publishing platform LBRY on November 7. The SEC accused LBRY of selling unregistered securities through its decentralized video-sharing platform.
The New Hampshire court found that LBRY offered the LBC token as an unregistered security and that the fair notice defence does not hold water.
The court ruled that “no reasonable trier of fact could reject the SEC’s contention that LBRY offered LBC as a security, and LBRY does not have a triable defence that it lacked fair notice.”
Although LBRY claims it isn’t giving up just yet, it thinks the decision may impact the entire crypto economy.
“The language used here sets an extraordinarily dangerous precedent that makes every cryptocurrency in the US a security,” LBRY tweeted. “Even after five years of fighting and a court ruling, we still honestly do not know how to legally launch a public blockchain in the US.”
We lost. Sorry everyone.
— LBRY 🚀 (@LBRYcom) November 7, 2022
Amid everyone in the industry wondering what this means for Ripple, CryptoLaw, a YouTube channel backed by XRP representative and attorney John E Deaton, tweeted ten reasons why the SEC’s latest victory will not affect Ripple on November 9.
10 reasons why the @LBRYcom case should NOT impact the @Ripple case (with timestamps from @JohnEDeaton1’s livecast)
A thread🧵(1/11)https://t.co/gf1YTg2BWb— CryptoLaw (@CryptoLawUS) November 9, 2022
Deaton stated that the first reason was that the judge was following the SG case. This 2003 case was filed against a company that operated a “virtual stock exchange” that turned out to be a Ponzi scheme, and according to him, the Ripple judge is not following the SG case.
Furthermore, the SEC has won cases in different circuits with different applicable laws. The law cited in the LBRY case (Warfield) does not apply to the Ripple case because they occurred in different circuits.
Deaton added that the XRP ledger has utility. It is backed by MasterCard and Visa and used as a substitute for fiat in some cases. Some companies use it to pay people. Besides, multiple international jurisdictions, including the UAE, Japan, the United Kingdom, Singapore, and Switzerland, have declared XRP not to be a security.
