The United States Securities and Exchange Commission (SEC) has recently revised the penalty originally determined against the crypto startup LBRY. This decision follows the SEC's lawsuit against LBRY for alleged violation of the US securities laws over the sale of LBRY’s LBC tokens. Instead of the $22 million penalty, the Commission reduced the penalty to $111,614 citing LBRY’s “inability to pay”. Despite this, LBRY responded to the decision by pointing to the SEC’s dual narrative around LBR being a security.

The US SEC highlighted comments from an unpaid volunteer moderator in LBRY’s community chat that favored the idea of LBC being a security. On the other hand, the SEC argued in a Coinbase filing that even statements from senior staff of the SEC about securities law do not mean or imply anything. This action has been highly criticized by US lawmakers who claim SEC Chair Gary Gensler has failed to provide clarity in the crypto market.

The clear double standard followed by the SEC highlights the need for more clarity and a legal framework that complies with established securities law. The filing by Coinbase that was denied by the SEC asked for the same - better understanding of how securities laws apply to the crypto market. Until such measures are taken, the crypto industry will continue to face uncertainty and lack of regulatory clarity. Moreover, the proposed regulation seeks to protect the investment of customers who choose to be part of the crypto space.

The SEC’s recent decision regarding LBRY has also offered some insight into the degree of risks companies face when dealing with the SEC. It indicates that a company’s financial status can be taken into consideration when determining the penalty issued by the agency. Nonetheless, the need of the hour is a better understanding of the legal and regulatory landscape in the crypto market, which can help provide clarity and certainty.



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