Incorporating the LBRY Case into Law School Curricula: A Call for Regulatory Scrutiny
Advocate John Deaton is urging law schools across the nation to include the LBRY case in their curriculum as a call for regulatory scrutiny. According to Deaton, this landmark case highlights the shortcomings of the Securities and Exchange Commission (SEC), exposing its ineffectiveness and flaws.
LBRY’s Origins and Legal Battle with the SEC
LBRY initially began as a self-funded project with the aim of creating a decentralized digital content-sharing platform. In 2016, they introduced LBC, their native currency, which was directly sold through their app. The SEC took legal action against LBRY in 2021, alleging that they sold LBC as an unregistered security. This legal battle has resulted in court orders, repayments, and fines.
Judgement Day for LBRY
On November 7, 2022, Judge Paul J. Barbadoro approved the SEC’s request for a quick decision against LBRY, Inc. LBRY’s founders shared on Twitter that this decision could potentially lead to the end of their platform due to the SEC’s proposed fine of over $20 million, surpassing their earnings from selling LBRY tokens.
Lessons to be Learned from the LBRY Case
John E. Deaton emphasizes the importance of including the LBRY case in law school teaching. He believes that this case offers valuable lessons beyond just applying the Howey Test to blockchain and cryptocurrency. Deaton argues that instead of targeting prominent players in the crypto world, such as FTX and Voyager, the SEC went after a small American company in New Hampshire, causing financial harm during the investigation.
Controversies Surrounding the LBRY Case
One of the key controversies surrounding the LBRY case is the absence of proven fraud or misrepresentation. The majority of LBRY Credits (LBC) holders were regular platform users, not typical investors. Despite the SEC’s significant expenditures on the case, it resulted in a relatively small $130,000 fine. Deaton asserts that this case alone demonstrates the ineffectiveness of the SEC as an agency.
Hot Take: The Need for Improved Regulatory Frameworks
The LBRY case serves as a reminder that regulatory frameworks in the crypto industry need improvement. The SEC’s actions against LBRY have raised concerns about its effectiveness and fairness in targeting smaller entities rather than focusing on larger players. This case emphasizes the necessity for clearer guidelines and regulations to ensure a fair and transparent environment for all participants in the crypto space.
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