The U.S. Securities and Exchange Commission has defeated peer-to-peer content distribution network LBRY.
The U.S. District Court for the District of New Hampshire has ruled that LBRY offered its LBRY Credits (LBC) token as an unregistered security.
"We're going to lick our wounds for a little bit but we're not giving up," LBRY tweeted in response to the ruling.
The SEC sued the decentralized content platform in May 2021 for selling unregistered securities just months after bringing a similar lawsuit against blockchain company Ripple.
LBRY claimed that LBC has utility, arguing that some buyers intended to use the token instead of holding it as an investment. Federal Judge Paul Barbadoro rejected this argument. "Nothing in the case law suggests that a token with both consumptive and speculative uses cannot be sold as an investment contract...Accordingly, statements from a subset of LBC holders that they purchased LBC for use on the LBRY Blockchain is of limited relevance in determining whether LBRY offered it as a security" the judge stated. "While some unknown number of purchasers may have acquired LBC in part for consumptive purchases, this does not change the fact that the objective economic realities of LBRY's offerings of LBC establish that it was offering it as a security," he added.
Serious implications for Ripple
The LBRY saga has been closely tracked by lawyers since it could end up being a landmark case. In June, LBRY suggested that the case would affect Ripple and the entire crypto industry.
The agency’s victory is likely to have serious implications for the Ripple case since the SEC will use the ruling to bolster its position. The SEC believes that Ripple sold its XRP token as an unregistered security.
Ripple-friendly attorney Jeremy Hogan claims that the LBRY case will likely make it into the SEC's final brief.
The Ripple lawsuit is expected to end in the first half of 2023.