LBRY Loses Case Against SEC, For Selling Unregistered Securities.
LBRY, a peer-to-peer content distribution network, has lost its lawsuit against the Securities and Exchange Commission for offering its LBRY Credits (LBC) token as an unregistered security according to the U.S. District Court for the District of New Hampshire.
A copy of the ruling was published on Monday by the company behind the LBRY protocol.
“We lost. Sorry everyone,” said LBRY on Twitter.
“We’re going to lick our wounds for a little bit but we’re not giving up. 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 best is yet to come 🚀,” they added.
We lost. Sorry everyone.
— LBRY 🚀 (@LBRYcom) November 7, 2022
The LBRY Case
Soon after suing blockchain company Ripple for selling unregistered securities, the SEC sued a decentralized content platform for selling unregistered securities in May 2021.
In the memorandum associated with the decision, the SEC argued that LBRY had engaged in unregistered securities sales in violation of Section 5 of the Securities Act of 1933.
Judge Paul J. Barbadoro rejected LBRY’s claim that LBC had utility, because some buyers were intending to use the token rather than hold it as an investment.
The Judge stated, “Nothing in the case law suggests that a token with both consumptive and speculative uses cannot be sold as an investment contract…Accordingly, statements from a subset of LBC holders that they purchased LBC for use on the LBRY Blockchain is of limited relevance in determining whether LBRY offered it as a security.”
“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,” judge Barbadoro explained.
The Decision Could Impacting Ripple Case
Even though LBRY isn’t giving up yet, it does believe the ruling will affect the entire crypto industry.
“The full ruling in the SEC vs LBRY case can be read here. The language used here sets an extraordinarily dangerous precedent that makes every cryptocurrency in the US a security, including Ethereum,” LBRY tweeted.
A precedent may well be set by this ruling and may be applied to other pending and future SEC cases involving cryptocurrencies, as Jeremy Kauffman, CEO of LBRY speculates.Andrew Rossow, an attorney and adjunct law professor, spoke to Decrypt Ripple could be affected, since the company has been fighting the SEC since 2020.