LBRY, a blockchain-based file-sharing and payment network that powers decentralized platforms, has lost its legal battle with the United States Securities and Exchange Commission (SEC), raising questions on how Ripple could avoid a similar result in the ongoing XRP lawsuit.
A New Hampshire judge ruled on Monday that LBRY violated securities laws by selling its native token LBC without registering with the SEC.
Reacting to the ruling via its official Twitter handle, LBRY wrote, “We lost. Sorry everyone.”
Read Also: Why the SEC Won’t Win Ripple in the XRP Lawsuit, Attorney Jeremy Hogan Explains
According to LBRY, although the loss is painful, the blockchain still has a bright future and the team will not stop building, believing that the best is yet to come.
LBRY tweeted, “We’re going to lick our wounds for a little bit but we’re not giving up. We’ve got a bright team, tens of millions of pieces of content, hundreds of thousands of creators, and one of the most popular web3 apps in the world. The best is yet to come.”
We're going to lick our wounds for a little bit but we're not giving up.
We've got a bright team, tens of millions of pieces of content, hundreds of thousands of creators, and one of the most popular web3 apps in the world.
The best is yet to come 🚀
— LBRY 🚀 (@LBRYcom) November 7, 2022
The blockchain firm further said that the language used in the summary judgment makes virtually all cryptocurrencies in the United States a security, including the second-largest crypto Ethereum (ETH).
“The language used here sets an extraordinarily dangerous precedent that makes every cryptocurrency in the US a security, including Ethereum, “LBRY added.
In March 2021, the SEC filed a lawsuit against LBRY, alleging that LBC tokens were securities and that the firm had violated securities laws by selling them without registering with the agency.
In response to the allegation, the startup claimed that LBC tokens were not securities and that the SEC did not give it fair notice that its sale of LBC was subject to securities laws, resulting in the violation of its right to due process.
In favor of the SEC, Federal Judge Paul Barbadoro ruled that “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 en t it led to judgment. The SEC’s Motion for Summary Judgment is granted, and LBRY’s Motion for Summary Judgment is denied.”
Read Also: Firm Has No Financial Relationship with Ripple, But Ready to Support Its Fight against the SEC
Should Ripple Worry Over XRP Securities Status?
Actually, LBRY’s loss to the SEC really didn’t hurt many investors. The embattled LBC token is the 796th largest cryptocurrency by market cap. The highest trade it recorded on a given day was around $10,000. Although many investors are not hurt, one or two people would still be at loss due to the outcome of the case.
On the other hand, Ripple, the San Francisco-based cross-border payment firm, is also at loggerheads with the SEC in a case similar to that of LBRY. And the loss has certainly sent a message to Ripple’s camp.
Unlike LBRY, the XRP community is huge. There are numerous XRP holders. This implies that a loss would have a massive impact on the crypto industry.
The strategy the SEC used to win against LBRY is also being applied by the agency against larger crypto projects, such as XRP. With the Ripple case winding down, one must wonder whether the ruling is a boost to the SEC’s argument.
Going by the ruling document, the securities watchdog was able to convince the court that LBRY completed an unregistered securities offering by selling its LBC token.
Read Also: Blockchain Association Legally Joins Ripple and XRP in the Fight against the SEC
It’s certain that the victory is a big one for the SEC, which uses the Howey Test in most of its crypto lawsuits.
Over the past weeks, many companies within and outside the crypto industry have come out to support Ripple legally through amicus briefs. So far, 12 companies, including Coinbase, have formally supported Ripple and the teeming XRP community members now anticipate the end of the lawsuit.
Things seem to be working in favor of Ripple in recent weeks, but what could the significance of the recent SEC victory be? Does the SEC now have a leg to stand on in the Ripple case? Could the Howey Test be used to label XRP as a security as well?
According to LBRY as aforementioned, the language used by the judge sets “an extraordinarily dangerous precedent that makes every cryptocurrency in the US a security, including Ethereum.”
In these last days of the XRP lawsuit, anything can happen. So, Ripple should learn from LBRY’s loss for the future of the crypto industry.
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