Small Unknown Blockchain Startup’s Lawsuit With SEC Could Make History• March 11, 2022 8:32 pm • Comments
The SEC’s lawsuit against Ripple has been a major focus of the crypto industry with many investors expecting that case to affect the agency’s future agenda on how to regulate crypto.
Unknown to most people, there is also another small unknown startup that is also currently in the midst of a lawsuit with the SEC where the result could implications as massive as the Ripple lawsuit.
In this lawsuit, the question is whether LRBY’s tokens are considered securities instead of a currency.
Many other small scale crypto projects are extremely similar to the LRBY token and the outcome would likely set the precedent for hundreds of current and future crypto projects.
This is extremely impressive given that the LRBY token is largely unknown and only has a market cap of around $21 million making it largely insignificant when compared to Ripple’s XRP.
— Francine McKenna (@retheauditors) March 11, 2022
The SEC sued LBRY last March for allegedly offering unregistered securities to raise a total of $6.2 million starting in 2016.
The SEC accused LBRY of offering and selling LBC to institutional investors and using the proceeds to pay bills for operating expenses.
Unlike bitcoin and some other cryptocurrencies that are more decentralized, LBC is managed by a centralized team.
That is why the SEC thinks LBC should be considered a security instead of a currency. Many crypto-related regulatory disputes surround debates over the definition of securities.
LBRY responded to the SEC in June, writing in a court filing that “LBRY’s sales of LBC do not resemble securities in any meaningful way.”
“The Supreme Court’s ‘investment contract’ test for the definition of a ‘security’ does not extend to situations where, like here, one ‘purchases a commodity for personal consumption,’” LBRY wrote.
The case is being compared to the Ripple lawsuit where Ripple was sued for allegedly raising capital through an unregistered securities offering.
One major difference to note is that LRBY did not even have an initial coin offering (ICO) which has led many confused as to why the SEC even sued LRBY in the first place.
This is because the SEC has been notorious for going after ICOs which were considered by the agency as a controversial way to raise capital.
What makes the LRBY case important to all XRP investors and all crypto holders is that if LRBY’s tokens are deemed to be considered a security, then technically all cryptocurrencies are considered securities.
This makes the SEC’s actions consistent given that they have not gone after top competitors like Ethereum.
Therefore, it would only make sense for LRBY’s token to not be considered a security which means that all crypto would not be considered securities including XRP.
In return, LBRY & Ripple got sued.
Look who the SEC gave a free pass to👇
— Daniel (@997_Carrera) March 11, 2022
Keith Miller of Perkins Coie, LBRY’s defense attorney, said, “LBRY intends to vigorously defend this action. They stands by their answer to the SEC’s complaint and does not believe that LBCs are securities.”
As the case heats up, the project’s officials have cast themselves as unlikely heroes.
“HELP US SAVE CRYPTO,” LBRY called out to supporters in a pinned tweet, featuring an image with LBRY as David and the SEC as Goliath.
The SEC declined to provide a comment for this story.
Whether LRBY wins or loses this lawsuit, the implications of the case will have lasting effects on the future of crypto in the US.
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