Ripple’s regulatory situation might remain uncertain for a while longer following the refusal by a U.S. district court judge to pass judgment on whether the secondary sales of LBRY Credits (LBC) amount to securities.
Judge Paul Barbadoro of the U.S. District Court for the District of New Hampshire declined to issue a ruling on the matter on July 11. The case, initiated by the United States Securities and Exchange Commission (SEC) against the decentralized content platform LBRY, could have set a potential legal precedent for Judge Analisa Torres. She is expected to adjudicate on a similar SEC litigation against Ripple in the upcoming months.
The key distinction between primary and secondary markets is that the former involves trades directly from the security-issuing company, while the latter refers to the buying and selling of securities among traders.
John Deaton, a U.S. attorney representing thousands of XRP tokenholders, expressed on Twitter on July 11 that he had sought clarity from Barbadoro on whether LBC should be treated as a security.
Barbadoro, however, chose to maintain his “judicial restraint”, according to Deaton. This recent decision from the judge marks a reversal from his previous stance during an appeal hearing in January, wherein Deaton had convinced him that secondary sales of LBC should not be considered a securities offering.
The judge clarified during the appeal that LBC would only be considered a security in the context of a direct sale.
Furthermore, the SEC has also conceded that secondary market sales of LBC do not equate to a security.
Despite winning a summary judgment in November 2022, the SEC opted to settle for $22 million at the appeal hearing held on January 30.
“But [that] won’t really matter for a typical XRP holder,” he added.
In a turn of events in May, the SEC proposed a modification to the settlement amount, requesting the court to impose a fine of $111,000 instead, pointing towards LBRY’s “lack of funds and near-defunct status.”