SEC Wins Court Case Against Blockchain-Powered Platform – Team Says Loss Sets ‘Dangerous Precedent’
The Securities and Exchange Commission (SEC) has won a court case against the blockchain-based publishing platform LBRY. According to LBRY, the SEC’s victory sets “a dangerous precedent” for crypto regulation in the US.
The win for the American financial regulator means that LBRY’s token LBC is deemed a security, subject to US securities laws. And according to LBRY, the same would apply to “every cryptocurrency in the US […] including Ethereum.”
According to the ruling, which was shared online by LBRY, the blockchain publishing company did not have “a triable defense that it lacked fair notice” from the SEC.
“Because 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 ruling, written by U.S. District Judge Paul J. Barbado, said.
In the court case, the SEC alleged that LBRY “offered and sold unregistered securities in violation of Section 5 of the Securities Act of 1933.” LBRY, on its side, argued that the LBC token is not a security, and called it instead “a digital currency that is an essential component of the LBRY Blockchain.”
“We lost. Sorry everyone”
LBRY shared the news of the ruling in a tweet to its more than 94,000 Twitter followers on Monday, saying, “We lost. Sorry everyone.”
“We’ve got a bright team, tens of millions of pieces of content, hundreds of thousands of creators, and one of the most popular web3 apps in the world,” the team added in a follow-up tweet. The team also made it clear that they are “not giving up” and warned other crypto projects that the ruling creates “an extraordinarily dangerous precedent that makes every cryptocurrency in the US a security.”
The full ruling in the SEC vs LBRY case can be read here.— LBRY 🚀 (@LBRYcom) November 7, 2022
The language used here sets an extraordinarily dangerous precedent that makes every cryptocurrency in the US a security, including Ethereum. https://t.co/plLZuzBRpO
LBRY is a decentralized network that seeks to simplify the way content is distributed and accessed by consumers. The project was launched in late 2018.
The network’s LBC token has a market capitalization of just $8.7m, making it a micro-cap token by global standards, data from CoinMarketCap shows. The token can be traded only on Bittrex, CoinEx, and MEXC.
The price of LBC fell by around 40% on the first day after news of the ruling broke on Monday, but has since trimmed some of its losses. As of press time (14:00 UTC) on Tuesday, the token was down by 33% for the past 24 hours to $0.013.
LBRY’s legal problems with the SEC started back in March of 2021 when the SEC claimed that LBRY had raised money from token sales of its “credits” in an “unregistered securities” offering.
At the time, the crypto-focused lawyer Jake Chervinsky said many crypto lawyers were critical of the SEC’s enforcement action against LBRY. “For the first time, most seem to agree that the SEC is in the wrong—as a matter of policy, if not as a matter of law,” Chervinsky wrote on Twitter at the time.