LBRY vs. SEC: ‘Secondary Sales Aren’t Securities’ May Be Good News for Ripple

The LBRY case continues to shed light on how courts may swing for Ripple over the SEC’s XRP lawsuit

article-image

Vector-3D/Shutterstock.com modified by Blockworks

share

A judge clarified that LBRY Credit Tokens, known as LBC, are only considered securities at the time of direct sale, a ruling that could potentially bode well for Ripple. 

During an appeal hearing in New Hampshire Monday, the judge said the summary judgment handed down in November, which sided with the Securities and Exchange Commission (SEC), does not apply to secondary sales of LBC. 

The SEC sued LBRY in March 2021 for offering LBC tokens without registering with the agency. Although the LBRY team did not offer tokens to the public in an initial coin offering (ICO) or similar mechanism, they did keep tokens for themselves in a ‘pre-mine,’ which were subsequently released on secondary exchanges to fund operations, the SEC alleged.

In the summary judgment, the judge argued that the tokens incentivized the team to build the network, suggesting to investors that LBC would be a profitable investment on the secondary market. 

“LBRY has — at key moments and despite its protestations — been acutely aware of LBC’s potential value as an investment,” the summary judgment reads. “And it made sure potential investors were too.” 

Monday’s ruling may be a positive sign for Ripple, which is facing its own SEC lawsuit over its XRP tokens, which the regulator alleges were distributed in an unregistered security offering. 

Ripple has maintained that it never formally held an ICO, similar to the LBRY situation.

Loading Tweet..

The case will be decided in a summary judgment, which both Ripple Labs and the SEC agreed to in November 2022. 

In a small win for Ripple, the judge on the case ruled in September that the “Hinman documents,” emails between former SEC officials regarding ether’s classification, are permissible evidence.

In April 2022, Empower Oversight, a nonprofit whistleblower organization, released more than 200 emails, including Hinman’s, obtained via Freedom of Information Act request between current and former SEC employees. 

The group claimed the emails prove there were conflicts of interest associated with how the SEC selected enforcement actions against digital asset companies, specifically the agency’s decision not to view ether the same as XRP.


Get the news in your inbox. Explore Blockworks newsletters:

Tags

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

Blockworks and Cracked Labs are teaming up for the third installment of the Permissionless Hackathon, happening June 22–23, 2025 in Brooklyn, NY. This is a 36-hour IRL builder sprint where developers, designers, and creatives ship real projects solving real problems across […]

recent research

Research Report Templates.png

Research

The convergence of DePIN and energy generation aims to address modern grid challenges by incentivizing distributed generation.

article-image

While Arizona’s governor could veto another crypto reserve bill, similar North Carolina and Texas laws are approaching the finish line

article-image

However, they noted there’s now an increased risk that unemployment and inflation will rise in the coming months. 

article-image

The network’s most ambitious upgrade since the Merge brings validator streamlining, smart account UX and doubled blobspace to Ethereum

article-image

Debate over extra Bitcoin use cases has returned, two years on from Ordinals

article-image

Altcoin season may be on a permanent pause as the market matures and paths grow more selective