Crypto Unveiling: LBRY Challenges SEC’s Double Standards on Crypto Securities Law


  • LBRY, a crypto startup, criticizes the SEC for its dual narrative regarding the classification of its LBC, as security.
  • The SEC’s denial of Coinbase’s request for clarity on how securities laws apply to the market, along with Chairman Gary Gensler’s stance on classifying most crypto assets as securities.

The U.S. Securities and Exchange Commission’s (SEC) recent decision to revise the penalty on LBRY, a crypto startup, has sparked a contentious debate surrounding the agency’s approach to classifying cryptocurrencies as securities. In court filings, the SEC cited LBRY’s financial difficulties as the reason behind revising the penalty, leading LBRY to question the SEC’s dual narrative regarding its cryptocurrency, LBC. 

Additionally, LBRY referred to the SEC’s Coinbase filing, which sought clarity on how securities laws apply to the market. This article delves into the SEC’s actions, LBRY’s response, and the broader implications for the industry.

SEC’s Revised Penalty and LBRY’s Critique

The SEC’s decision to revise the penalty imposed on LBRY has raised eyebrows within the crypto community. Initially, the SEC levied a $22 million penalty against LBRY in a lawsuit alleging violations of U.S. securities laws related to the sale of its cryptocurrency, LBC. However, the SEC later revised the penalty to a significantly reduced amount of $111,614, citing LBRY’s supposed inability to pay and its near-defunct status.

LBRY has taken issue with the SEC’s reasoning, calling attention to the agency’s dual narrative. LBRY argues that the SEC’s emphasis on its financial difficulties contradicts its classification of LBC as a security. The company points to the SEC’s comments about its staff statements on securities law, highlighting the inconsistency in the agency’s approach. LBRY’s reference to the SEC’s Coinbase filing further underscores its frustration with the lack of clarity from the regulatory body.

SEC’s Denial of Clarity Request and Criticism of Chairman Gensler

In a recent development, the SEC requested a judge to deny Coinbase’s request to compel the agency to respond to a rulemaking petition. Coinbase sought clarity on how securities laws apply to the crypto market, aiming to address the ambiguity surrounding the regulatory landscape. This request, however, was denied by the SEC, reinforcing the lack of transparency and clarity surrounding the classification of cryptocurrencies.

SEC Chairman Gary Gensler has been at the center of criticism for his stance that a majority of crypto assets should be classified as securities based on existing rules. Lawmakers have raised concerns about the lack of clear guidelines and the potential stifling effect on innovation within the crypto industry. LBRY’s latest statement reflects the frustration shared by many industry participants regarding the SEC’s reluctance to provide regulatory clarity.

LBRY’s Challenge and the SEC’s Disregard of Staff Statements

LBRY’s response to the SEC’s emphasis on a single sentence from an unpaid volunteer moderator in their community chat as evidence of LBC being a security reveals the company’s skepticism of the SEC’s approach. LBRY questions the weight placed on such statements and challenges the SEC’s disregard of even senior staff statements about securities law. This further adds to the growing concern over the lack of consistency and transparency in the SEC’s decision-making process regarding cryptocurrencies.

The broader implication of LBRY’s challenge is the need for a comprehensive and clear regulatory framework for cryptocurrencies. As the crypto market continues to expand and evolve, it is essential to establish guidelines that strike a balance between protecting investors and fostering innovation. The current state of regulatory ambiguity not only hampers the growth of the industry but also leaves market participants in a state of uncertainty.


The ongoing battle between LBRY and the SEC highlights the challenges faced by the crypto industry in navigating the regulatory landscape. The SEC’s revision of the penalty imposed on LBRY, coupled with its refusal to provide clarity on how securities laws apply to cryptocurrencies, underscores the need for a consistent and transparent regulatory framework.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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Haseeb Shaheen

As a Web Researcher and Internet Marketer, Haseeb Shaheen delivers relevant valuable content for audiences. He focuses on financial and crypto market analysis, as well as technology-related areas that help people change their lives.

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