Hester Peirce: SEC case against LBRY ‘unsettled me’

The lawsuit “illustrates the arbitrariness and real-life consequences of the commission’s misguided enforcement-driven approach to crypto,” Peirce says


SEC Commissioner Hester Peirce | Permissionless II by Blockworks


SEC Commissioner Hester Peirce is once again dissenting from a crypto-related decision made by the agency she helps lead.

Peirce, who has historically spoken out about her support for a spot bitcoin ETF and other facets of the crypto space, did not agree with the Securities and Exchange Commission’s decision to bring a case against LBRY, she said in a Friday statement. 

The SEC filed a lawsuit against the blockchain-based file-sharing network in March 2021 — accusing it of offering LBRY Credit tokens (LBC) without registering them as securities.

LBRY CEO Jeremy Kauffman previously expressed concern this decision could potentially endanger the entire US crypto industry, as it would establish a precedent that could classify “almost every cryptocurrency” as security.

“The commission has brought many troubling crypto enforcement actions, but the LBRY…case has especially unsettled me,” she noted.

Read more: SEC Crypto Enforcements on Track to Eclipse 2022

LBRY’s approach was “more conservative” than those other projects took, Pierce said, making the SEC’s action against the company “especially puzzling.” Monetary remedies sought by the SEC — originally amounting to $44 million — were “entirely out of proportion to any harm,” she added.

LBRY said last week it would cease operations, citing its legal defeat to the SEC.  

“Are investors and the market really better off now after the Commission’s litigation contributed to the demise of a company that had built a functioning blockchain with a real-world application running on top of it?” Peirce added in the statement. “This case illustrates the arbitrariness and real-life consequences of the Commission’s misguided enforcement-driven approach to crypto.”

A spokesperson for the SEC did not immediately return a request for comment. 

This isn’t the first time Peirce has spoken out against SEC opposition to the crypto segment. She said during a discussion with Florida International University law students in March that enforcement should only come after regulations are put in place.

Those comments came before the SEC sued Coinbase and Binance in the same week in June. Those cases, which both involve alleged securities violations, are ongoing. The crypto exchanges have denied wrongdoing. 

Peirce, in an interview with CNBC Monday, said she has believed for five years that the regulator should approve a spot bitcoin ETF — noting “the logic for why we haven’t [approved one] has always mystified me.”

The SEC commissioner put forward a safe harbor proposal in April 2021 that would give developers a grace period to experiment with decentralized networks while being exempted from certain federal securities laws.

“Our disproportionate reaction in this case will dissuade people from experimenting with blockchain technology, which LBRY aptly describes as ‘technology that enables dissent,’” Peirce said Friday. “A government of a free people should welcome dissent and the technologies that enable it.”

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