By
Temitope Olatunji
April 24th, 2024
According to the LBRY vs SEC ruling, the crypto company marketed its digital token through its development plan, thus classified as a security.
The case between the United States Securities and Exchanges Commission (SEC) and LBRY Inc has come to a conclusion that the crypto community may not enjoy. On the bitter pill, United States District Judge Paul J Barbadoro has ruled that LBRY sold security tokens despite not participating in an initial coin offering (ICO). Consequently, the LBC token has recorded major losses in the past 24 hours to trade around $0.01281708, down approximately 37 percent.
The ruling has caused considerable panic in the cryptocurrency industry, with Bitcoin price retracting below $20k. The urgent and persistent question is whether Ripple‘s case is watertight against the SEC. Otherwise, XRP risks following the same path as the LBC token.
“As I have explained, the only issues raised by the parties’ cross-motions for summary judgment are whether LBRY offered LBC as a security and whether LBRY received fair notice that it needed to register its offerings. Because 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, the SEC is entitled to judgment. The SEC’s Motion for Summary Judgment (Doc. No. 55) is granted, and LBRY’s Motion for Case Summary Judgment (Doc. No. 61) is denied,” Judge Barbadoro noted.
LBRY Inc vs SEC on Howey Test
The United States government, through the SEC, among other relevant agencies, have gone for cryptocurrency companies with ‘predatory’ business models. According to the LBRY vs SEC ruling, the crypto company marketed its digital token through its development plan, thus classified as a security.
Under the Howey test, every contract, scheme, or transaction is subject to review. As a result, most blockchain projects in the United States that participated in an early ICO are subject to review by regulators.
“The language used here sets an extraordinarily dangerous precedent that makes every cryptocurrency in the US a security, including Ethereum,” LBRY noted in a tweet.
LBRY founder Jeremy Kauffman reiterated that the ruling establishes a threatening precedent in the entire United States cryptocurrency industry. Moreover, other countries may not subject their cryptocurrency companies to such rulings, thus creating an imbalance for US-based firms.
Ripple CEO Brad Garlinghouse has threatened to move the company’s headquarters to friendlier markets, including Dubai. Nonetheless, the time for moving without a trial may be long gone for most crypto companies in the United States, hence trapped by their success.
According to market data provided by Coingecko, the LBC token is down 73 and 47 percent in the past year and 30 days, respectively. Notably, the LBC token has existed since mid-2016, when it achieved its ATH.
Worth noting that the LBC token has never achieved a new ATH despite the 2021 crypto bull market.