LBRY to challenge SEC’s accusation of securities law violation

Decentralized file-sharing network LBRY (LBC) filed a declaration of intent to challenge the accusations that the SEC had moved against it.

In a Sept. 7 filing, LBRY’s legal counsel appealed to the United States Court of Appeals for the First Circuit. This Court’s final judgment was issued in July. The judge then declined to rule whether the sale of LBRY’s LBC tokens constituted an unregistered security offering.

LBRY, a decentralized content platform, has been embroiled in a legal battle with the US Securities and Exchange Commission (SEC). The regulator filed a civil lawsuit against LBRY in March 2021, alleging that the platform’s unregistered sales of LBRY Credits (LBC) constituted securities offerings. The SEC sought a $22 million disgorgement request and an injunction to halt any further LBC sales by LBRY.

In November 2022, the SEC emerged victorious in the case, with the court ruling that LBC qualified as a security. LBRY, however, criticized the SEC’s calculation of the $22 million demand, arguing that it was excessive and failed to consider the reasonable operational costs associated with their business. LBRY expressed concerns about its viability, warning of potential financial ruin due to mounting legal and SEC debts.

Following the court ruling, LBRY made a settlement offer to the SEC, which reportedly gave the SEC everything LBRY owned. However, LBRY’s offer was rejected, and the details of the offer were not publicly shared due to legal counsel advice. LBRY expressed disappointment with the rejection, stating that it had offered the SEC everything it owned.

LBRY’s newfound will to argue with the SEC follows a series of recent wins by crypto companies against the SEC. One notable victory came from a court ruling in favor of Grayscale, which has reignited calls for the removal of SEC Chair Gary Gensler.

This ruling, coupled with XRP’s partial victory over the SEC last month, has raised questions about the consistency and arbitrariness of the SEC’s enforcement-style regulations under Gensler’s leadership. Market participants in the crypto sphere have responded optimistically to these developments, with renewed investor optimism in the crypto market.

Democratic Party member Rep. Ritchie Torres has commended the Ripple vs. SEC case ruling and emphasized the need for regulatory balance, urging the SEC to focus on actual wrongdoers rather than stifling legitimate crypto businesses. Grayscale’s victory is also expected to reshape the course of Bitcoin innovation in the United States. These wins by crypto companies against the SEC highlight the ongoing tension and evolving dynamics between regulators and the crypto industry.