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SEC Wins LBRY Protocol Case: Is Every U.S. Crypto A Security?

Decrypt | Kate Irwin | Nov 7, 2022

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The Securities and Exchange Commission has won its case against LBRY, Inc., the company behind the LBRY protocol announced Monday along with a published copy of the ruling.

“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,” U.S. District Judge Paul J. Barbado wrote in the conclusion of the ruling.

  • Ruling:  According to the ruling’s memorandum, the SEC argued in its complaint that LBRY “offered and sold unregistered securities in violation of Section 5 of the Securities Act of 1933.”
    • But LBRY does not believe it is selling securities, and countered that its LBC token “functions as a digital currency that is an essential component of the LBRY Blockchain.”
    • The SEC has not yet published a press release regarding the case. The agency initially charged LBRY for selling unregistered securities in March 2021.

See:  The SEC Will Be Watching You…Every Text You Send

LBRY wrote on Twitter in response to the ruling:

The language used here sets an extraordinarily dangerous precedent that makes every cryptocurrency in the US a security, including Ethereum.

Andrew Rossow, an attorney and adjunct law professor:

The Court missed the mark in identifying a distinction that possibly speaks to a further clarification of what a ‘reasonable expectation of profits’ means under Howey, as it applies to projects such as LBRY.

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