Crypto users and advocates are rallying somewhat uncertainly around the cause of the decentralized content platform operator LBRY. The operator has been hit with a USD 11m legal challenge from the US Securities and Exchange Commission (SEC) – which, per legal documents filed with the New Hampshire District Court, claims that the operator has raised money from token sales of its “credits” in an “unregistered securities” offering.
The SEC has already gone on the warpath accusing Ripple of similar misdoings with its XRP token. And earlier in the year, a congressional select committee sought to take the Tron (TRX)-owned decentralized DLive platform to task for what it claimed was its role in the storming of the Capitol building in Washington DC in early January.
But it appears that crypto defenders will not give up without a fight. LBRY itself has launched a website named Help LBRY Save Crypto, where it claims that even if the SEC’s move does cripple the company itself, the decentralized nature of its LBRY network and blockchain protocol means that users themselves will be able to continue using the platform.
On the website, the firm stated that the SEC appears to have gone to what seems like extremes in its pursuit of the firm, writing,
“At times, the SEC has made representations that even tipping USD 0.25 worth of credits for a clever GIF is an unregistered security transaction that must be registered and tracked. However, it’s unclear at this time if the SEC will continue to make this allegation in court.”
On Reddit, some users claimed that it was time to put “tribalism” in the past and unite with a coordinated response. One called the regulator’s approach akin to “a blind bull destroying everything” in its path.
Another mused that it “feels like something big is happening,” claiming it could well be a “great culling of crypto.”
Others claimed that regulatory scrutiny might not necessarily be a bad thing – weeding out “scam” players might help lend legitimacy to crypto’s cause, they suggested.
But others still claimed that the cases against LBRY and Ripple amounted to an existential threat.
One poster claimed that the community needed Ripple or LBRY to win their lawsuits to risk the SEC “opening up CoinMarketCap and start litigating down the list.”
The poster, Lemonmule69, added,
“[The SEC] can see an untapped wealth of fines and settlements here and they want to be the regulator who controls crypto in the USA. You might hate XRP, but right now Ripple and their lawyers are preventing the SEC from getting their hands on the crypto market.”
On another thread, one concerned individual asked: “What next? Bitcoin? They think they can go for anyone.”
And elsewhere, posters variously claimed that the SEC move was “bearish as f***,” and did not “bode well” – with one claimed that they would be “selling” their tokens out of fear of what might come next.
A few claimed that the SEC legal challenge may well have been grounded, and did not necessarily mean that the regulator had set its sights on a range of disparate crypto targets.
One opined that the SEC had moved because LBRY “broke an important securities law,” adding,
“Raising money from the public to capitalize on a new business is regulated. Many new cryptocurrency offerings [have been] used as capital-raising, as an innovative way to bypass this regulation. The SEC is saying that the law was broken, that issuing a cryptocurrency is not a legal way to avoid the regulations constraining public capital raising.”
However, it appears that LBRY, too, will not cave in without a struggle and claimed, further,
“The SEC claims that credits have no use other than speculation, which contradicts the facts and history of experience on LBRY. The LBRY credit […] allows individuals to create an identity, tip creators, and publish, purchase, and boost content in a decentralized way. Millions of people have used it this way, and were using it well before we sold any tokens to anyone. The SEC is completely ignoring this.”
The SEC’s failure-to-register enforcement action against LBRY is drawing widespread criticism from crypto lawyers a… https://t.co/DnA5BxrnGR
— Jake Chervinsky (@jchervinsky)
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(Updated at 19:49 UTC with a tweet.)