SEC wins critical lawsuit against crypto company LBRY
- LBRY states the ruling sets an extraordinarily dangerous precedent that makes every crypto in the US security, including Ethereum.
- SEC alleges that LBC tokens were securities and that the firm had violated securities laws by selling them without registering with the agency.
- The ruling is likely to have a negative impact on SEC’s lawsuit against Ripple Labs Inc. and its digital token, XRP.
The US regulatory watchdog-the Securities and Exchange Commission (SEC) has won its lawsuit against crypto firm LBRY Inc on Monday.
Federal Judge Paul Barbadoro of the District Court for New Hampshire ruled that “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 Judge further ruled, “While some unknown number of purchasers may have acquired LBC in part for consumptive purchases, this does not change the fact that the objective economic realities of LBRY’s offerings of LBC establish that it was offering it as a security”
LBRY inc, which is a blockchain-based file-sharing network, took to Twitter to share the news.”We lost. Sorry everyone,” LBRY wrote on Twitter. “We’re going to lick our wounds for a little bit, but we’re not giving up.”
LBRY further tweeted that the language used in the ruling sets an extraordinarily dangerous precedent that makes every cryptocurrency in the US security, including Ethereum.
LBRY founder Jeremy Kauffman reiterated the implication the ruling would have on the Web3 space. “The SEC vs LBRY case establishes a precedent that threatens the entire US cryptocurrency industry. Under the SEC vs. LBRY standard, almost every cryptocurrency, including Ethereum and Doge, are securities”, he said. “The future of cryptocurrency in the US now rests in with an organization even worse than the SEC: the United States Congress,” added Kauffman.
The legal battle between SEC and LBRY began in March 2021 when SEC sued LBRY, alleging that LBC tokens were securities. The agency further, in its lawsuit, claims that LBRY had violated securities laws by selling LBC without registering with SEC.
In response to the allegation, LBRY stated that its token “functions as a digital currency that is an essential component of the LBRY Blockchain.” LBRY further alleged that the regulatory agency did not give it fair notice that its sale of LBC was subject to securities laws, thus violating the company’s right to due process.
Crypto enthusiasts fear the ruling could have a negative impact on SEC’s lawsuit against Ripple Labs Inc. and its digital token, XRP.SEC SEC sued Ripple Labs in late 2020, alleging that it had raised over $1.3 billion by selling XRP in unregistered securities transactions. Ripple has argued that XRP tokens are used for making international payments and are, therefore, not securities.