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Is Ripple XRP next? SEC’s legal win vs LBRY is ‘extraordinarily precedent’ for all cryptocurrencies

By Daniela Ešnerová

15:38, 8 November 2022

SEC and cryptocurrency logos
“I would expect this case to make its way into the SEC’s final brief in the Ripple case,” attorney Hogan said. -- Shutterstock

The win by the Securities and Exchange Commission (SEC) in its court case against a blockchain start-up, LBRY, has set an “extraordinarily dangerous precedent” for all cryptocurrencies, LBRY warned

On Monday, a New Hampshire judge sided with the regulator, ruling that LBRY’s issuance of its native token, LBC, constituted a sale of unregistered securities.

The 19-month-long suit centered on the same question at the core of the most high-profile case, SEC vs. Ripple Labs, as well as the wider ongoing debate on whether cryptocurrencies are securities.

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Ripple (XRP) to US Dollar

Precedent threatens entire US cryptocurrency industry

The SEC filed a complaint against LBRY at a federal court in New Hampshire for failing to register its offering last March. LBRY pushed back against the claim, arguing that it did not sell LBC as a security and that the SEC did o't give it fair notice that the sale was subject to securities laws.

The summary judgement hearing was held in July. After the hearing, LBRY’s founder and chief executive, Jeremy Kauffman, warned that the SEC’s comments could imply that anyone selling any cryptocurrency, including ETH, in the United States, is acting against the law.

On Monday, the court rejected both LBRY’s arguments in granting summary judgment to the SEC.

The federal judge, Paul Barbadoro, of the District Court for the District of New Hampshire, 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 defense that it lacked fair notice, the SEC is entitled to judgment. The SEC’s motion for summary judgment is granted.”

In the wake of the ruling, Kauffman, reiterated his warning: “The SEC vs LBRY case establishes a precedent that threatens the entire US cryptocurrency industry,” he wrote.

“Under this standard, almost every cryptocurrency, including Ethereum and Doge, are securities. The future of crypto now rests with an org worse than the SEC: the US Congress,” Kauffman concluded.

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Ethereum (ETH) to US Dollar

Ripple (XRP) implications

Jeremy Hogan, an attorney and partner at the law firm Hogan & Hogan in Orlando, Florida, echoing Kauffman’s sentiment, commented on the outcome: “LBRY fought the good fight but lost at summary judgment. The judge hung his hat largely on the fact that there was essentially no use for the tokens at the time of the sales.”

“I would expect this case to make its way into the SEC‘s final brief in the Ripple case.”

The SEC is currently embroiled in an almost two-year-long dispute against the issuer of XRP, Ripple Labs. In December 2020, the SEC sued Ripple Labs arguing that the company raised $1.3bn by selling XRP, which the watchdog deemed unregistered securities. 

As regulators and crypto industries around the world are working to set up a legislative framework for cryptocurrencies, the legal status of digital assets is often in a limbo. 

In the US, it is yet to be established which regulatory body should be the authority to oversee the cryptocurrency market.

The SEC’s chair, Gary Gensler, claimed that “nothing about the crypto markets is incompatible with the securities laws, almost all cryptocurrencies are securities.”

A recently leaked bill authored by two US senators, Debbie Stabenow, a Democrat from Michigan, and John Boozman, a Republican from Arkansas, outlined how the EC’s counterpart, the Commodity Futures Trading Commission (CFTC), should regulate cryptocurrencies.

Markets in this article

XRP/USD
Ripple / USD
0.62537 USD
0.03476 +5.960%
ETH/USD
Ethereum / USD
3426.96 USD
-16.62 -0.480%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
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CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
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