LBRY against the SEC: A Closer Look at the ETF Appeal Process

2023-09-19, 09:25

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LBRY has appealed against a SEC ruling that its cryptocurrency, LBC, is a security.

In addition to barring the trading of LBC the SEC imposed a hefty financial penalty on LBRY.

LBRY users can create, upload, share and view content using the application.

Keywords: SEC lawsuits, SEC vs. LBRY, LBRY case, LBRY judgement, SEC sue SEC, LBRY lawsuit update, LBRY protocol 
## Introduction
Legal battles involving cryptocurrencies are common in the United States as various regulators compete to establish their jurisdictions over different crypto assets and services. There are many cases where various regulatory bodies have ordered some cryptocurrency projects to discontinue the sale of crypto products like DeFi derivatives.

In this article, we discuss LBRY’s appeal against the SEC and the possibility for its success. 
## LBRY Battles with SEC
[LBRY](https://www.gate.io/how-to-buy/lbry-credits-lbc "LBRY"), a decentralized content publishing and sharing platform, has appealed against the United States Securities and Exchange Commission (SEC)’s recent ruling which declared that its token, LBRY, is a security. According to the SEC, the fact that LBRY created L[BRY coins](https://www.gate.io/price/lbry-credits-lbc/ars "BRY coins"), held and sold them later turned [them into securities](https://www.gate.io/de/blog_detail/2708/sec-labels-37-cryptocurrencies-as-securities-implications-for-trading "them into securities").

Nevertheless, on 7 September LBRY filed its intent to challenge the SEC’s ruling in the United States Court of Appeals for the First Circuit after the U.S. District Court for the District of New Hampshire passed its final judgement on 11 July that sided with the SEC’s decision to bar the sale of its coin.

As a fact, LBRY has been fighting a legal battle against the SEC since 2021 when it declared that the sale of LBRY credits (LBC) was illegal as it had not registered it with the regulatory body. That decision forced LBRY to wind down its operations and shut down.

In addition, the SEC sought a $22 million disgorgement which LBRY contested on the basis that it had incurred huge operational costs. As a result, the U.S. District Court for the District of New Hampshire’s ruling revised down the penalty to $111,614.

Further to that, the court permanently restrained LBRY from directly or indirectly offering an unregistered crypto security. In fact, the Federal Judge Paul Barbadoro, of the District Court for the District of New Hampshire stated, “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.”

Despite its earlier indication that it would discontinue its operations and the sale of LBC, on 7 September LBRY launched an appeal against the court judgement. 
## LBRY’s Response
Primarily, the management of LBRY contends that the SEC and the subsequent court rulings on the LBC were erroneous, therefore it is seeking to overturn them. Jeremy Kauffman, the founder of LBRY protocol, believes that the outcome of the SEC vs. LBRY case has sweeping implications on the entire crypto industry.

Through an email to Coindesk Kauffman stated, "The SEC vs. LBRY case establishes a precedent that threatens the entire US cryptocurrency industry. Under the SEC vs. LBRY standard, almost every cryptocurrency, including <a href="/uk/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> and Doge, are securities. The future of cryptocurrency in the US now rests in with an organization even worse than the SEC: the United States Congress.”
## Reasons for the Appeal
As said earlier, LBRY management believes that the LBRY judgement was faulty. According to Coindesk, Kauffman said, “LBRY is appealing the [court's] decision because it is unjust and incorrect.”

He added, “The SEC has shown clear intent to use this ruling to damage the cryptocurrency industry more broadly. We won't let them."

In addition, recent crypto projects victories against the SEC lawsuits could have motivated LBRY to make its own appeal. For instance, [Ripple Labs’ partial victory against the SEC](https://www.gate.io/uk/blog_detail/2960/xrp-climbs-on-the-4th-spot-among-cryptocurrencies-following-ripple-s-sec-triumph "Ripple Labs’ partial victory against the SEC") might have given LBRY hope that it may as well win against it.

Recently, a federal court judge ruled that Ripple coins (<a href="/uk/price/xrp-xrp" target="_blank" class="blog_inner_link">XRP</a>) sold on crypto exchanges do not constitute securities. However, the coins that are sold directly to institutional investors are crypto securities.

Therefore, Ripple’s partial win against the SEC has set a precedent that some cryptocurrencies are not securities. It is most likely that LBRY may use similar arguments against the regulatory authority.

Likewise, [Grayscale had a small victory](https://www.gate.io/blog_detail/158/the-1st-cryptocurrency-investments-grayscale-what-is-gbtc "Grayscale had a small victory") when a panel of three judges of the DC Circuit Court of Appeals gave a mandate to the SEC to review the application of the digital asset management firm to convert its trust into a spot <a href="/uk/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> ETF.

Read also: [Impact of Grayscale Event and Spot ETF](https://www.gate.io/live/video/a327841641b5beddfe67506a5c382fd7 "Impact of Grayscale Event and Spot ETF")

Meanwhile, many crypto leaders and insiders are following the developments of the SEC lawsuits against LBRY, Ripple and [Grayscale](https://www.gate.io/blog_detail/3140/daily-news-grayscale-won-the-lawsuit-btc-rose-wu-jihan-cautiously-bullish-on-the-market-long-term-holders-continue-to-increase-their-holdings-of-btc "Grayscale"). The reason is that their outcomes have a great bearing on the future of the crypto industry, not only in the United States but also globally.

Read also: [XRP Price Prediction & Forecast for 2023, 2025, 2030](https://www.gate.io/price-prediction/xrp-xrp "XRP Price Prediction & Forecast for 2023, 2025, 2030")

LBRY’s appeal against the SEC will likely give a good pointer to the approach the regulatory authority is using to regulate cryptocurrencies. It may indicate the consistency or inconsistencies of the SEC when supervising crypto activities in the country.

Already, a large community of XRP supporters and investors support LBRY’s stance against the SEC, indicated by its appeal. For instance, Lawyer Bill Morgan, a Ripple sympathizer said “Everyone is on your side, especially holders of the LBC token. I always said it wasn’t a good judgment.”

Read also: [Ripple (XRP) Poised for a 20% Price Surge](https://www.gate.io/blog_detail/3195/-ripple-price-surge-indicators "Ripple (XRP) Poised for a 20% Price Surge")
## What is LBRY and What does it Offer?
Now to cap our discussion on the LBRY lawsuit update, let’s explore what LBRY is. LBRY is a decentralized protocol that enables people to publish and share digital content. It supports various media such as audios, videos and ebooks.

It has its own blockchain that uses a proof-of-work consensus mechanism. As a result, the protocol users can earn its native cryptocurrency, LBRY coin also called Library Credits (LBC) through mining. Additionally, LBC enables users to create, publish and share their digital content.

This protocol is decentralized, meaning that it allows anyone to create, publish, share and view digital content on the platform. Since the blockchain uses a proof-of-work consensus mechanism miners earn LBC for verifying transactions. Therefore, the “SEC sue LBRY case" has created much inconvenience among its users. 
## Conclusion
LBRY has appealed against the SEC ruling that its coin, LBC, is a crypto security which requires registration before offering it to the investors. Several events such as the partial wins of Ripple and [Grayscale over the SEC](https://www.gate.io/live/video/280322cbbe007ada7b702ff053776e27 "Grayscale over the SEC") have motivated it to appeal against the judgement. The LBC drives the LBRY blockchain used for storing and sharing digital content. 
## FAQs about LBRY
### What is the Library vs. SEC case?
Library is engaged in a legal battle against the SEC. In 2021 the United States Securities and Exchange Commission (SEC) declared that the sale of LBRY credits (LBC) was illegal as they were not registered with the regulatory body. On 11 July, through its final judgement, the U.S. District Court for the District of New Hampshire confirmed that LBC is a security. However, on 7 September LBRY appealed against the judgement.
### What was the summary judgement of the SEC vs. LBRY case?
The U.S. District Court for the District of New Hampshire declared that the LBRY coin (LBC) is a security token which should be registered before being offered for sale. Thus, the court asked LBRY to stop selling LBC and to pay a penalty of $111,614.
### Did LBRY win the lawsuit?
LBRY lost the lawsuit against the SEC since the court ruling barred it from selling its coin (LBC). In addition, the U.S. District Court for the District of New Hampshire ordered LBRY to pay a fine of $111,614.

<div class="blog-details-info">
<div>Author:** Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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