SEC wins lawsuit against LBRY token

A U.S. court ruled in favor of the SEC in the LBRY token case.

A U.S. court has sided with the SEC in the LBRY token case. The ruling comes after a suit accusing the crypto platform of selling its native LBC coins without first registering them with the SEC.

LBRY token classified as a security

On Monday, the New Hampshire District Court classified the LBC Coin as a security. This is a win for the U.S. Securities and Exchange Commission (SEC), which sued LBRY in March 2021. LBRY is a project aiming to offer a decentralized, open-source alternative to YouTube and similar platforms.

The suit stemmed from the release of its own token, LBC, which the SEC classifies as a security token. Because the sale of securities must be registered and approved by the SEC and this was not done, the agency took legal action. The court has now ruled in favor of the SEC.

The judge outlines in a report that the ruling rests, among other points, on the notion that nothing in U.S. case law suggests a token that is both consumer and speculative can be sold as a non-security (page 17).

SEC vs. LBRY: A regulatory step back?

The ruling was seen by LBRY.Inc and the crypto scene as a step back in regulation:

The court’s decision also matters as a potential indicator in the SEC’s case against Ripple. Ripple, led by Brad Garlinghouse, is another major crypto issuer caught up in an SEC lawsuit over whether its token sales were securities offerings without proper registration. The Ripple case is especially significant because it could set a precedent for future decisions on the legal classification of blockchain tokens as securities.

Ripple had gained momentum in September in the case, helped by the handover of the so-called "Hinman files". But the New Hampshire ruling is likely to temper Ripple’s optimism in the weeks ahead.