LBRY loses to SEC, ruled as a security. Comments from various sectors gathered. How easy is it to be classified as a security?

The LBRY case demonstrates that the scope of court review is quite broad, including the team's long-term posts on major social media platforms, as long as arguments about the token's long-term value have been mentioned. Even if no expected profits were mentioned at the time of token issuance and disclaimers were listed, it could still be deemed a security. The outcome of this case sets a very unfavorable precedent for major cryptocurrencies and may have an impact on the Ripple lawsuit.

According to the ruling, U.S. District Judge Paul J. Barbado has determined that LBRY violated Section 5 of the 1933 Securities Act by "offering and selling unregistered securities." For more details on the LBRY lawsuit, please refer to the court documents.

Judge: LBRY Unable to Rebut LBC's Investment Nature

Judge Barbado mentioned the following in the ruling:

LBRY raised two points against the SEC:

1. LBC is an application-specific token designed for the LBRY blockchain.

2. Some LBC holders purchase for usage, not for investment purposes.

From the above two points, LBRY argues that even if the tokens they offer may be used for investment purposes, LBC does not qualify as a security.

However, LBRY is mistaken both factually and legally. In case law, there is no statement indicating that tokens with consumer or speculative utility do not constitute an investment contract. Despite LBRY's arguments to the contrary, I cannot dismiss the SEC's argument; otherwise, whenever tokens have some consumer utility, securities laws would not apply to projects that involve endless, ever-changing schemes promising substantial profits to others' funds.

LBC holders claim they purchase coins for using the LBRY blockchain. While their intent may impact the question of entering into an investment contract, we must focus on whether LBRY made promises to investors.

Note: Case law refers to the legal precedent set by previous cases, which becomes a guideline for judges in similar future cases.

Public Opinion | LBRY: Other Tokens at Risk

LBRY expressed remorse for losing the lawsuit on Twitter and emphasized that they will not give up. They also believe that this lawsuit will set a dangerous precedent for the crypto space:

These statements set a very dangerous precedent that will make all cryptocurrencies in the United States securities, including Ethereum. The worst-case scenario is that even after five years of litigation, we still don't know how to lawfully launch a public chain in the United States. Does anyone know?

LBRY founder Jeremy Kauffman also shared a similar view, mentioning Dogecoin as well.

CryptoLaw: Quoting Old Laws Equals Death Sentence

CryptoLaw founder John E Deaton stated that this is a terrible judgment, and if the judge continues to refer to U.S. laws, it will be a death sentence for projects.

Delphi Labs: Declaring as Security Too Simplistic

Gabriel Shapiro pointed out that the judge believes that even without any promises or investment contracts from the team, the mere existence of pre-mined tokens is enough to determine the team's operations related to expected profits and pass the Howey test, which is a terrible outcome.

He emphasized the crux of this case, stating that although LBC has utility, holders will eventually discuss prices at some point; although there was no ICO, any sales activity would violate securities laws under Reg D.

Court's Review Scope Extensive

Legal advisor Max Solomons stated that the court reviewed materials including blog and Reddit posts, and even emails with private investors to reach a conclusion, as LBRY mentioned in their article here:

We are very bullish on the long-term value proposition of LBRY, but this depends on the team focusing on the task at hand, which is to build this thing properly.

The actual utility of the token was excluded from the discussion on securities laws, making it legally untenable.

According to CoinGecko data, LBC has dropped by 38% since 11/7, with a 30-day decline of 52%.