SEC wins lawsuit against blockchain-powered platform – loss sets ‘dangerous precedent’
The Securities and Exchange Commission (SEC) has won a lawsuit against the blockchain-based publishing platform LBRY. According to LBRY, the SEC’s victory sets “a dangerous precedent” for crypto regulation in the United States.
The win for the US financial regulator means that LBRY’s token LBC is considered a security, subject to US securities laws. And according to LBRY, the same will apply to “every cryptocurrency in the United States […] including Ethereum.”
According to the ruling, which was shared online by LBRY, the blockchain publishing company “did not have a pretrial response that it lacked fair notice” from the SEC.
“Because no reasonable plaintiff could rebut the SEC’s allegation that LBRY offered LBC as collateral, and LBRY does not have a pretrial response 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 lawsuit, the SEC alleged that LBRY “offered and sold unregistered securities in violation of Section 5 of the Securities Act of 1933.” LBRY, for its part, argued that the LBC token is not a security, instead calling it “a digital currency that is an important component of the LBRY Blockchain.”
“We lost. Sorry everyone”
LBRY shared news of the ruling in a tweet to his more than 94,000 Twitter followers on Monday, saying: “We lost. Sorry everyone.”
“We have a great 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 sets “an extraordinarily dangerous precedent that makes every cryptocurrency in the United States a security.”
LBRY is a decentralized network that seeks to simplify the way content is distributed and accessed by consumers. The project was launched at the end of 2018.
The network’s LBC token has a market cap of just $8.7 million, making it a micro-cap token by global standards, data from CoinMarketCap shows. The token can only be traded on Bittrex, CoinEx and MEXC.
The price of LBC fell by around 40% in the first day after news of the ruling broke on Monday, but has since pared some of its losses. At press time (14:00 UTC) on Tuesday, the token was down 33% in the last 24 hours to $0.013.
LBRY’s legal troubles with the SEC started back in March 2021 when the SEC claimed that LBRY had raised money from token sales of its “credits” in an “unregistered securities” offering.
At the time, crypto-focused attorney Jake Chervinsky so many crypto lawyers were critical of the SEC’s enforcement actions against LBRY. “For the first time, most people seem to agree that the SEC is wrong — as a matter of policy, if not as a matter of law,” Chervinsky wrote on Twitter at the time.
