SEC vs. LBRY: Deaton And Gannon Submit Request To File Amicus Brief On Behalf Of Naomi Brockwell.
Attorneys John E. Deaton and Bill Gannon have submitted a request to file an amicus brief on behalf of Naomi Brockwell in support of LBRY’s Motion To Limit The Remedies against the US Securities and Exchange Commission.
Defense lawyer James K. Filan, whom Deaton thanks for offering “guidance,” was the first to share the request on Twitter yesterday.
I would encourage people to pay close attention to FN 9 of the Brief. A big thank you to Jimmy @FilanLaw who always takes my call when I need a little guidance. Also, in the brief I quote and cite @NYcryptolawyer and his law firm’s work product. https://t.co/802JgQCM7e
— John E Deaton (@JohnEDeaton1) December 15, 2022
Deaton’s CryptoLaw also shared the document submitted to the court minutes later.
JUST ADDED to our Document Library:
✅Motion to File Amicus Brief on Behalf of @naomibrockwell in Support of @LBRYcom Motion to Limit @SECGov Remedies. Exhibit A is the Proposed Brief, Co-Authored by @JohnEDeaton1 👇https://t.co/bqnvLxYOIA
— CryptoLaw (@CryptoLawUS) December 15, 2022
The 30-page document (tables included, with an amicus brief taking up only eight pages) seen by The Crypto Basic seeks to clarify the secondary sales of LBRY Credits (LBC). While the court, in a status conference on November 21, had urged the SEC to provide clarity on the secondary sales of the token in such a way that holders could continue to use it without fear of restrictions, the SEC had failed to do so prompting LBRY’s Motion To Limit The Remedies against the SEC.
Consequently, in support of LBRY’s motion, the brief urges the court to make a ruling that permits the sale of LBC by individuals unaffiliated with LBRY. In addition, it urges decisions from the court to allow the “consumptive” use of LBC
“Despite this Court’s strong recommendation to provide clarity, the SEC either disagrees or prefers regulatory uncertainty regarding secondary market transactions,” Deaton and Gannon write. “Therefore, any potential injunction issued by this Court, should expressly permit secondary market sales of LBC by persons unaffiliated with LBRY. Likewise, any potential injunctive relief should expressly allow the continued consumptive use of LBC.”
It bears mentioning that in early November, the court ruled in favor of the SEC’s summary judgment motion conceding that LBRY offered and sold unregistered securities in the form of LBC tokens. However, the extension of this ruling by the SEC to people like Naomi Brockwell, who has never bought or sold LBC but received it and used it for content on the platform from other users, would be harmful to consumers, argued the attorneys in the amicus brief.
In support of their claims, Deaton and Gannon argue that even if LBRY offered and sold an investment contract, its impending dissolution nullifies such a contract. In addition, the lawyers highlight that the courts have never held that the underlying token of an investment contract alone constitutes security. Consequently, they assert that it would be problematic to do so here.
The document discloses that the SEC did not object to the filing. If the court approves, the regulator will have seven days to respond.
Deaton also said: “I challenge anyone to read it and then try to classify the #LBC acquired by Naomi Brockwell as securities. It can’t be done. Even the most ardent SEC backer will concede that not a single Howey factor is satisfied.”
For many, the LBRY case like that against Ripple highlights the lack of regulatory clarity in the crypto space on what constitutes a commodity or security. While some believe that the court ruling in favor of the SEC in the case against LBRY is indicative of the outcome in the Ripple case, Deaton argues otherwise, as reported by The Crypto Basic.