LBRY Judge’s Ruling on Secondary Crypto Sales Raises Concerns for Ripple

Ripple, the blockchain payment protocol, may have reason for apprehension as a U.S. district court judge declined to determine whether the secondary sale of LBRY Credits (LBC) qualifies as a security.

Judge Paul Barbadoro of the U.S. District Court for the District of New Hampshire made the ruling on July 11 in a case brought against decentralized content platform LBRY by the United States Securities and Exchange Commission (SEC).

This ruling potentially establishes legal precedent for Judge Analisa Torres, who is presiding over the SEC’s case against Ripple and is expected to deliver a decision in the coming months.

In his ruling, Barbadoro stated that he would not express an opinion on whether the registration requirement applies to secondary market offerings of LBC. This distinction is important as the secondary market involves the buying and selling of securities, while the primary market deals with direct trading from the company issuing the security.

John Deaton, a U.S. lawyer representing numerous XRP tokenholders, reached out to Barbadoro seeking clarification on whether LBC qualifies as a security. Ultimately, Barbadoro decided to maintain his “judicial restraint,” according to Deaton.

This latest opinion from Barbadoro contrasts with his earlier stance expressed during a January appeal hearing, where Deaton successfully argued that the secondary sale of LBC does not constitute a securities offering. Barbadoro clarified during the appeal hearing that LBC is only considered a security when sold directly. The SEC also acknowledged that secondary market sales of LBC do not fall under the category of securities.

While the SEC achieved a summary judgment in November 2022, it opted to settle for $22 million during the appeal hearing on January 30. In May, the SEC revised this figure and requested a fine of $111,000, citing LBRY’s financial constraints and near-defunct status.

Meanwhile, Jeremy Hogan, a U.S.-based attorney and advocate for Ripple, noted that Judge Analisa Torres is likely to deliver her ruling within the next couple of months. Hogan suggested that the overall outcome would be known before the end of the year, barring a complete victory for Ripple. However, he added that the specifics of the ruling would not significantly impact the average XRP holder, even in the event of an unfavorable outcome.

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