The court dismissed the platform’s claims that its tokens were not securities and that it had not been given enough time to register the token.
Background on the Sec Vs. Lbry Case
The decision was made in response to a complaint filed by the United States. In 2021, the Securities and Exchange Commission determined that LBRY received more than $11 million from the sale of unregistered securities in violation of Sections 5(a) and 5(c) of the Securities Act of 1933.
LBRY is a blockchain that allows hosts to host "slices" of user-generated content. Viewers can pay for content that is accessible via unique identifiers, similar to the Ethereum Name Service.
After making a payment, the viewer will be given access to a decryption key, allowing them to view the content. The content from the hosts will be assembled and presented to the viewer by the viewer's LBRY client. The LBRY blockchain keeps a record of the LBC token's balances.
In June 2016, the platform launched its platform. In one month, the market capitalization of its LBC token increased from $140 million to $1.2 billion. It intended for LBC to have an optimum circulating supply of one billion tokens. It initially set aside 400 million LBC tokens for itself. It also set aside 100 million LBC for non-profit and non-governmental organization donations and another $100 million for operating expenses.
LBRY auctioned over 9.8 million LBC tokens to the general public. It sold an additional 44.1 million LBC through various exchanges and advertised them as long-term investments. The platform stated that the token's value would rise as it expanded the network, including various disclaimers in its marketing materials.
Despite these disclaimers, the court decided that LBRY was completely aware of the possibilities of its token as an investment vehicle and had been unable to provide investors with adequate disclosure.
However, some in the crypto community are involved that the ruling will jeopardize the crypto industry's future.
BitBoy, a crypto influencer, stated that the case's result is bad for altcoins and initial coin offerings (ICOs). To raise funding for a new venture, cryptocurrency companies use ICOs to sell tokens. Tokens typically award the holder a stake or utility in the project.
BitBoy also stated that this case is unlikely to have an impact on the SEC vs. Ripple Labs dispute over whether the firm's XRP asset is a security and that Ripple Labs is likely to win.
In 2020, the SEC filed a complaint alleging that Ripple Labs and two executives profited handsomely from the sale of XRP. It claimed that these assets were securities.
Ripple Labs' chances of victory got better after several parties, such as Coinbase and Senator Cynthia Lummis (R-Wyo), filed amicus curiae filings to be considered part of the case.
However, according to Coingecko and TradingView data, the LBC token price has now dropped from $0.019 to $0.013.
What are your thoughts on the SEC's victory over LBRY? Do you think this will set a precedent for other crypto projects?