A New Hampshire District court on Monday, found LBRY, a crypto startup, guilty of violating securities law by selling its native LBC tokens without registering with the U.S Securities and Exchange Commission (SEC).
The Securities Exchange Commission had earlier sued LBRY in March 2021, claiming that LBC tokens were securities and that the startup had violated securities laws by selling them without registering the LBC tokens with the agency. Responding to this, LBRY claimed that the LBC tokens were not securities and that the SEC did not give a “fair notice” that the sale of LBC was subject to securities laws, which violates the company’s right to due process.
This lawsuit was finally addressed on Monday, the 7th of November 2022, where Paul Barbadoro, the Federal Judge of the District Court for the District of New Hampshire, ruled in favor of SEC. The Judge asserted 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.”
Before this court injunction, the founder of LBRY, Jeremy Kauffman, had earlier explained in September during the Mesari’s conference in September that the outcome of this case could have sweeping implications for the wider crypto industry. Adding to this, Kauffman opines that the outcome and decisions made in the now-concluded court case will apply to every crypto company in the crypto space.
Shedding more light on the court case’s effect, he stated that “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. The future of cryptocurrency in the US now rests in with an organization even worse than the SEC: the United States Congress.”
In the initial court filing, SEC begged the court for a permanent order to stop LBRY from selling more LBC tokens, emesis its “ill-gotten gains, plus prejudgement interest,” in addition to other penalties.
Reacting to the judgment, LBRY took to Twitter to announce the outcome of the court case, adding that “The language used here sets an extraordinarily dangerous precedent that makes every cryptocurrency in the US a security, including Ethereum.”
The court’s ruling only means that the case will not proceed to trial, but a status hearing that will determine the next line of action has been slated for the 21st of November.