According to a Monday report, the Securities and Exchange Commission (SEC) has won its lawsuit against blockchain-based publishing company LBRY Inc. for allegedly selling unregistered securities.
With this win, the SEC’s claim that LBRY’s token LBC is security has been validated subject to U.S. securities laws. LBRY has described the regulator’s victory as one that “sets a dangerous precedent” for crypto regulation in the U.S., adding that the same would apply to every crypto token across the country, Ether (ETH) included.
The case started in 2021 with the SEC alleging that the New Hampshire-based company violated U.S. law by selling its LBRY Credits without registering them as securities. According to the regulator, this violated Section 5 of the Securities Act of 1933.”
Crypto-focused lawyer Jake Chervinsky commented that most crypto lawyers were critical of the SEC’s enforcement action against LBRY. His Twitter post read:
“For the first time, most seem to agree that the SEC is in the wrong—as a matter of policy, if not a matter of law.”
LBRY, on its side, challenged that the LBC token is not a security. Instead, the blockchain company termed it “a digital currency that is an essential component of the LBRY Blockchain.” The ruling, written by U.S. District Judge Paul J. Barbados, said:
“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.”
LBRY Apology To Users
LBRY shared the news on the ruling on Twitter, announcing the loss to its 94,000 followers on Monday, November 7:
“We lost. Sorry, everyone.”
In a follow-up tweet, the LBRY team reassured users that they would rally every available resource to move forward. An excerpt from the Twitter thread read:
“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 team also articulated that quitting was not an option for them, using the opportunity to pass a warning to other projects in the industry to beware of the ruling, saying:
“….it creates a dangerous precedent that makes every cryptocurrency in the U.S. security.”
Effect Of The Ruling On LBC Token Price
LBRY is a decentralized network launched in 2018 and committed to simplifying content distribution and access to consumers. Since its market debut, the project’s native token, LBC, has steadily gained popularity to achieve a market cap of $8.7 million, securing a slot as a micro-cap token by international standards, according to CoinMarketCap data.
Following the news about the ruling, LBC’s price fell by approximately 40% within 24 hours post-announcement on Monday. However, some of these losses have since been trimmed. At the time of this writing, the token is down by 32.5% over the last seven days. LBC is trading at $0.0132 on CoinGecko as of press time. The token can be exchanged only on Bittrex, CoinEx, and MEXC.