This article discusses LBRY’s decision to appeal against the SEC’s ruling that deemed its token sales as unregistered securities, examining the potential impact of recent legal victories for crypto firms like Ripple on LBRY’s case and the broader implications for the crypto industry’s regulatory landscape.
In a significant turn of events, LBRY, the blockchain-based file-sharing and publishing platform, has decided to appeal against the US Securities and Exchange Commission (SEC) after a landmark ruling in 2022 that deemed its token sales as unregistered securities, leading to the platform’s shutdown.
This decision to appeal comes after months of uncertainty and follows in the footsteps of recent legal victories for crypto firms against the regulatory agency, injecting renewed optimism into LBRY’s battle for regulatory clarity.
The SEC filed a lawsuit against LBRY in March 2021, alleging that the company had violated federal securities laws by selling unregistered securities. The SEC alleged that LBRY’s LBRY Credits (LBC) tokens were securities because they were offered and sold as investments, with the expectation of profits to be generated from the growth of the LBRY platform.
LBRY denied the SEC’s allegations, arguing that LBC tokens were not securities because they were not investment contracts. LBC tokens, LBRY argued, were simply a means of exchange on the LBRY platform, and did not represent an investment in the company.
In November 2022, the court granted summary judgment in favor of the SEC, finding that LBRY had violated Section 5 of the Securities Act of 1933 by selling LBC tokens without registering them with the SEC. The court rejected LBRY’s argument that it lacked fair notice of the application of the securities laws to its offer and sale of LBC tokens.
The court also issued a permanent injunction against LBRY, prohibiting them from continuing to breach the registration requirements outlined in federal securities laws and from engaging in unregistered offerings of crypto asset securities in the future.
However, LBRY has not thrown in the towel. The appeal, filed with the United States Court of Appeals for the Second Circuit, marks a pivotal moment in its ongoing legal battle. LBRY’s management believes that the SEC’s ruling was erroneous and is determined to overturn it.
The Ripple XRP Precedent
The crypto community and industry insiders have been closely watching LBRY’s case, especially due to its potential implications for Ripple Labs.
During LBRY’s legal turmoil, Ripple was also entangled in a similar lawsuit with the SEC, which alleged that the company’s XRP token sales constituted unregistered securities. However, Ripple emerged victorious, securing a favorable ruling that its token sales did not violate securities laws. This success has raised speculations about LBRY’s chances of a similar outcome in its appeal.
Ripple’s case set a significant precedent because the court ruled that not all cryptocurrencies are securities. If the court applies the same reasoning to LBRY’s appeal, it could lead to a substantial reversal of fortunes for the embattled platform.
The Ongoing Debate
Legal experts, however, caution that the outcome of LBRY’s appeal is far from certain. Each case is unique, and the court’s decision will depend on the specific facts and circumstances surrounding LBRY’s token sales.
As the legal battle unfolds, the entire crypto industry will be closely monitoring the proceedings and hoping for a favorable outcome that can provide much-needed regulatory guidance and establish a precedent for future cases. LBRY’s determination to appeal serves as a testament to the resilience of crypto projects in the face of regulatory challenges, highlighting the industry’s commitment to navigating the complex regulatory landscape to ensure its continued growth and innovation.
Rickie Sanchez is an article writer specializing in cryptocurrency news. Since late 2017, he has been actively investing in cryptocurrencies. He is enthusiastic about everything that has to do with crypto and he hopes that the readers of his articles in the years to come will gain a massive understanding of blockchain technology.