The US Securities and Exchange Commission scored another victory over a cryptocurrency project this week. This result has raised concerns about his battle with Ripple, but things may not be so bad.
The SEC wins another victory
Earlier this week, the SEC scored another enforcement victory on a digital asset project. It accused LBRY of selling unregistered titles on its decentralized video editing platform.
Officially, the SEC has accused LBRY of conducting an unregistered securities offering, similar to the one it accused Ripple (and many others) of. It claims that LBRY did not file a registration statement and that, therefore, it "withheld from potential investors the information required for such a public offer." The verdict fell and the SEC won the case.
The crypto community has reacted with concerns that this could set a precedent for the rest of the industry. At the time, the LBRY team warned:
"The language used here sets an extraordinarily dangerous precedent that makes every cryptocurrency in the US a security, including Ethereum."
LBRY had launched a call on Twitter to ask netizens to help him "save crypto". They added that the future of cryptos was in danger in the US. In addition, the tweet links to a link to sign an online petition.
Ripple could win its lawsuit
John Deaton, who supports the YouTube channel CryptoLaw, pointed to several reasons why the LBRY case should not have an impact on Ripple.
The first reason is that the judge in charge of LBRY's case was following the SG case. The latter, which took place in 2003, was brought against a company operating a "virtual stock exchange". This scholarship was actually a scam based on the Ponzi scheme. The Ripple judge does not follow the SG case.
In the United States, court cases take place in what are called circuits. They are groupings of several American states that have common jurisdictions. The Ripple case takes place in the second circuit which includes Connecticut, New York and Vermont. The LBRY case took place in the New Hampshire circuit.
Map of the different judicial circuits in the USA
According to Deaton, "The SEC chose an obscure company in a small jurisdiction because it had a favorable judge and wanted to get a favorable ruling."
Erroneous reasoning by the SEC
According to the SEC, it is irrelevant that the issuer did not promote the asset in any way. Judge Torres, who presides over the Ripple case, may find this reasoning "flawed." Deaton said:
"In 76 years of case law, no investment contract has ever been found when there is no link between buyer and seller."
Also, the XRP ledger has a utility. It is backed by MasterCard and Visa and used as a substitute for fiat currency in some cases.
Finally, several international jurisdictions, such as the United Arab Emirates, Japan, the United Kingdom, Singapore, and Switzerland, have declared XRP nota security.
The Ripple token (XRP) has not escaped the black day that crypto markets are currently undergoing. At the time of writing, the token has fallen by 19.22% in the last 24 hours.
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