- The value of LBC plummeted more than 30%, trading as far as 96% down at one point, in light of the ruling;
- The token’s price sank after a federal judge ruled that LBRY had violated U.S. securities laws by selling its native LBC token without first registering with the SEC, implying that LBC is a security;
- LBRY responded to the ruling, asserting that it sets “an extraordinarily dangerous precedent that makes every cryptocurrency in the US a security, including Ethereum”.
LBC, the native token of LBRY, a decentralized file-sharing and payment network, plunged in value by more than 30% following the announcement on Monday, November 8th, that it had lost its case against the U.S. Securities and Exchange Commission (SEC).
The token slumped from $0.0193 to a lowest point of $0.000625, which represents a 96% decline, according to data from CoinGecko. Though LBC quickly rebounded to trade at $0.0123, the token remain approximately 35% down from its price point before the announcement. Further exacerbating the situation, LBC is now down 99% from its all-time high of $1.60.
These extreme fluctuation came after New Hampshire Federal Judge Paul J. Barbado ruled that LBRY had indeed broken U.S. securities laws by selling LBC without first registering with the SEC, which sued the crypto startup in March of 2021 on that very precedent.
In its defense, LBRY argued that LBC functions as a digital currency that plays an essential role in securing the LBRY blockchain. The firm claimed that the SEC’s attempt to label LBC as a security “violates its right to due process”, as the agency had failed to give “fair notice that its offerings of LBC are subject to the securities laws”.
According to Judge Barbado, however, LBRY’s claim to fair notice was unfounded due to the SEC basing its argument on “a venerable Supreme Court precedent that has been applied by hundreds of federal courts across the country over more than 70 years”.
The judge further underlined that, by linking the startup’s financial future to the success of the token, “LBRY made it obvious to its investors that it would work diligently to develop the Network so that LBC would increase in value”.
“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 entitled to judgment,” the judge concluded.
LBRY responded to the ruling with an apology to users that it lost the case, but warned that the language used in the ruling sets “an extraordinarily dangerous precedent that makes every cryptocurrency in the US a security, including Ethereum”.
Jeremy Kauffman, the Founder of LBRY, asserts that the ruling “threatens the entire US cryptocurrency industry” and that “the future of crypto now rests with an organization worse that the SEC: the U.S. Congress”.
LBRY remains determined, stating that it will “lick our wounds for a little bit but we’re not giving up”, implying the potential for further legal action.
With this ruling, the case will not go to trial, and the next steps are set to be presented on November 21st.
On the Flipside
- LBRY’s determination to not give up, as well as its assertions that the best is yet to come, could indicate that the startup is looking to take further legal action to avert the outcome of the case.
Why You Should Care
The ruling could provide a foundation that enables the SEC to go after other crypto tokens such as ETH or DOGE. This would mean that ETH, and perhaps even BTC, which are generally labeled as commodities, could be considered securities by the SEC, which has already outlined this stance on Proof of Stake tokens such as Ethereum. Many believe this judgment will come as a hard blow to the crypto industry.
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