Feb. 2, 2023
Since Gary Gensler became chair, the SEC has become increasingly hostile towards cryptocurrencies – specifically altcoins (cryptos other than Bitcoin).
He has made it clear that he more or less views all of them as unregistered securities. This stance acts as a sword of Damocles hanging over every crypto project, as they fear it’s only a matter of time before the SEC comes after them.
LBRY, Inc., a blockchain-based content sharing platform, experienced this first hand.
The SEC took enforcement action against LBRY in March 2021, alleging that the company sold its LBC token as an unregistered security in violation of the Securities Act. The SEC sought injunctive relief, disgorgement, and penalties.
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And in November 2022, the SEC went further, filing a complaint against LBRY for conducting an unregistered sale of crypto securities. Later, in June 2021, the court ruled in favor of the SEC's motion for summary judgment against LBRY, determining that LBRY offered its digital asset as an unregistered security. LBRY called the ruling a "dangerous precedent".
The SEC vs. LBRY case marked the first time a federal court has considered a token sold outside an initial coin offering (ICO) as an unregistered security. This ruling potentially set a precedent that digital assets can be considered securities without being registered with the SEC. This would effectively make every altcoin an unregistered security and also implicate many crypto exchanges that sell them.
Needless to say, the crypto community was put on notice. They have already been watching the SEC vs. Ripple case with bated breath hoping for a favorable outcome.
The SEC vs. Ripple lawsuit is an open court case in the United States Southern District Court of New York. The SEC alleges that Ripple raised funds by selling XRP tokens in unregistered security offerings to investors without first registering them as securities.
Ripple claims the SEC is making classifications based on bias rather than actual merit or well-defined rules.
The lawsuit began in December 2020 and a deadline of 30 November 2022 was set for Ripple and the SEC to file their replies in support of summary judgment. On February 23, 2022, the letter was submitted to the court of law, stating that the class-action case would begin on August 26, 2022. All final briefs are due by December 20, 2022 and absent a settlement, a decision is expected by the end of March 2023. The outcome of this case will have major repercussions for cryptocurrency regulation.
But crypto just got a major victory over the SEC.
In a shocking development, the SEC has settled on a security claim in the case of LBRY.
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They recently admitted that the sale of LBRY Credits (LBC) tokens in the secondary market does not constitute a security. This could have major implications for other projects in the crypto space, allowing them to operate without having to register with the SEC.
Is the tide turning?
It’s too early to say, but this case is a big win for the crypto industry. The final outcome of the SEC vs. Ripple case will likely be the ultimate verdict as the result will largely determine the future of crypto regulation in the US.
And in further good news on the regulatory front – SEC Commissioner Hester Peirce gave a speech on crypto last week where she stated:
“Crypto’s value proposition depends primarily on the builders of this technology, not on regulators like me, who lack technical expertise and stand on the periphery looking in.”
Let's hope that we get more open-minded regulators who see the value of blockchain technology and seek to foster growth and innovation rather than hinder its development.
Editor, Daily Profit Cycle