LBRY plans to challenge a New Hampshire federal judge’s ruling that sided with the Securities and Exchange Commission (SEC) that declared the platform’s token sales as unregistered securities.
The appeal comes after blockchain firm Ripple scored a partial victory in its fight with the country’s federal regulator. Prominent asset manager Grayscale’s most recent win is also one of the high-profile crypto industry victories that have given other platforms targeted by the SEC a new arrow in their quiver.
LBRY Fights Back
Decentralized content-sharing and publishing platform LBRY has filed an appeal with the United States Court of Appeals for the Second Circuit this week, seeking to challenge the final judgment issued on July 11 that ordered it to pay a civil penalty and prohibited it from participating in unregistered offerings of cryptocurrency asset securities moving forward.
In the latest filing, LBRY’s management has argued that the SEC’s verdict was flawed and is actively seeking its reversal.
LBRY has filed a Notice of Appeal against the SEC. pic.twitter.com/Zp9S0TP0Qw
— LBRY 🚀 (@LBRYcom) September 7, 2023
LBRY has been in the SEC’s crosshairs since March 2021, when the regulator claimed that its LBRY Credit token (LBC) constituted a security under the 1933 Securities Act. In November 2022, the New Hampshire District Court ordered LBRY to pay $22 million to the SEC, concluding that LBC qualified as an unregistered security based on its compliance with the Howey test.
LBRY contested this ruling, asserting that the $22 million sum was significantly high and did not consider the legitimate business expenses related to the development and hosting of its software. The SEC then requested a lesser punishment upon recognizing that the insolvent company was unable to meet the payment. A revised penalty of $111,614 was imposed.
Subsequently, LBRY disclosed plans to gradually conclude its operations over the coming months. The recent victories of Ripple and Grayscale against the SEC, however, have renewed hope regarding LBRY’s prospects for a favorable outcome in its appeal.
More Pressure on SEC?
Many believe that the appeal could set a promising precedent for other altcoins.
LBRY’s decision has also been touted as an “interesting move” that could put more pressure on the SEC, which itself moved to appeal and stay a July court decision in which Judge Analisa Torres ruled XRP largely was not a security under the guidelines of the agency.
Meanwhile, the legal team representing the blockchain firm argued that the SEC’s basis for seeking an appeal primarily stemmed from its “dissatisfaction” with the judge’s ruling, which determined that the XRP token did not meet the criteria for being considered a security in transactions with retail investors.