In a surprising request filed recently, the SEC asked that the court of New Hampshire downsize the penalties imposed on LBRY, a decentralized content platform best known for its video-sharing platform Odysee.

Legitimate Business Expenses Taken Into Account

Back in November of 2022, the New Hampshire District Court ordered LBRY to pay $22 million to the SEC, ruling that the latter’s token LBC was an unregistered security due to passing the Howey test.

“The SEC has based its claim on a straightforward application of a venerable Supreme Court precedent that has been applied […] across the country over more than 70 years.

The SEC identifies multiple statements by LBRY that it claims led potential investors to reasonably expect that LBC would grow in value [..]. LBRY minimizes the significance of these statements and points to its many disclaimers that it did not intend for LBC to be purchased as an investment, but the SEC is correct.”

At the time, LBRY opposed the ruling, stating that $22 million is a vastly overstated figure and failed to take into account legitimate business expenses incurred by the development and hosting of its software.

It is unclear whether the SEC took this into account, however, as the agency’s decision to request a lesser punishment is allegedly based on LBRY’s inability to pay rather than on a change of heart.

Smaller Fines Will Suffice

Motivating its decision to pursue a lesser penalty, the SEC stated that its surprising decision was taken due to LBRY’s inability to pay the original amount. At the moment, LBRY is nearly bankrupt and has stated that it will probably cease all operations in the future.

If the court heeds the SEC’s request, LBRY will be left with a fine of $111,614 to pay. They will also be barred from holding any future “unregistered offerings of crypto asset securities.”

Whether LBRY will be able to bounce back and stay afloat now that the money it owes the U.S. government has been dramatically reduced is difficult to tell.

In either case, the inability to raise funds via crypto has severely hampered the firm’s ability to collect revenue in a way that does not interfere with the experience of its users, meaning that the perks that make Odysee an interesting alternative to YouTube may soon be gone – if it stays online in the first place.

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