No ICO is not an excuse, Lbry judgment shows-bad news for ripple?

No ICO is not an excuse, Lbry judgment shows-bad news for ripple?

In a step that could have serious consequences for Ripple and other cryptocurrency companies, a federal judge has decided that the crypto startup LBRY has completed a non-registered security offer when selling LBC, the native token of the protocol.

The summary judgment, which prevents the case from being brought to trial, sets a provisional end to Lbry's legal dispute last year.

The SEC sued Lbry in March 2021 because of the offer of the tokens without prior registration with the agency. Although the public team did not offer token (ICO) or a similar mechanism in an initial, they held token for themselves in a "pre-mine", which were then released on secondary stock exchanges to finance the operation.

In the summary judgment, a federal judge argues that the tokens stimulated the team to build the network, which suggests investors that LBC would be a profitable investment on the secondary market.

"Lbry was very conscious - in crucial moments and despite its protests - of the potential value of LBC as an investment", according to the summary "> Judgment submitted Monday reads. "And it made sure that potential investors were too."

The judgment quotes Reddit-Threads, in which Lbry's community manager said potential investors that the token could "be worth something in the future". It is also said that the token has both consumer and investment purposes- the latter makes it a security because it did not pass the Howey test.

The Howey test, which determines what is considered a "investment contract" in accordance with the securities laws, was a hot topic in the crypto industry because the SEC strengthens its enforcement measures against projects and tokens. The news from Monday is not very surprising, said Mike Selig, advice from Willkie Farr and Gallagher LLP.

"The summary judgment supports the long -term view of the SEC that a very narrow range of cryptoassets is outside the area of ​​application of the Federal Working Act, solely on the grounds that the tokens have consumer use (or usefulness)," said Selig.

What could mean Ripple’s pioneering SEC case?

The judgment could be particularly bad for other companies or organizations that are closely connected to utility tokens, including Rippledas currently leads its own legal disputes around the XRP token, and projects such as Filecoin (FIL) said. Rippleda's offer of was also not an ICO, which, according to Monday, may no longer be a solid defense.

"The SEC has made its position on 'Utility Tokens' clear in the past five years through dozens of enforcement measures," he said.

"The great irony of the enforcement measures of the SEC against utility token projects is that they have pushed the crypto industry in a positive direction in the direction of decentralization," he added.

When the SEC lbry sued, the protocol argued that it had not received a fair notification and no proper procedure, a point that the judge quickly dismissed on Monday.

"With this argument, Lbry has given up every broad claim that there was a lack of adequate notification of how the Howey test is generally applied to digital tokens," the judgment said.

lbry admitted the setback, but could decide to make an appeal against the Monday judgment on the case in which the parties could fight in court.

The protocol confirmed the judgment on Monday on Twitter, but insisted that the team would not be "not given up".

"We have an intelligent team, millions of content, hundreds of thousands of creators and one of the most popular web3 apps in the world," says the company's tweet.

lbry did not react immediately to the request of block works for further comments.

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The article No Ico is no excuse, Lbry Ruling Shows - Bad News for Ripple? is not a financial advice.