SEC Commissioner Hester Peirce Slams Regulator’s Approach on LRBY Case

Hester Peirce of the United States Securities and Exchange Commission has issued a dissenting remark on the regulator’s approach to the crypto sector. In a statement on October 27, the crypto-friendly commissioner lambasted the SEC’s enforcement actions against the LRBY blockchain company. 

Back in March 2021, the US securities regulator filed a lawsuit against LBRY, claiming the sale of the firm’s LBC token represented an offering of unregistered securities. In November 2022, the US Court finally ruled in favor of the SEC, subjecting LBRY to penalties imposed by the Commission.

Although LBRY did file an intent to appeal this ruling, it appears the blockchain firm will not be following through with this action, having recently announced plans to wind down its operations due to financial debts to the SEC, a private debtor, and its legal team. 

SEC Lawsuit Against LBRY ‘Unsettling’, Hester Peirce Says

Diving into Hester Peirce’s most recent dissent against the SEC, the commissioner claimed to have found the agency’s enforcement action against LBRY “unsettling” and was never in support of the lawsuit against the blockchain firm. 

Peirce stated the SEC’s decision to file a case against LBRY was quite “puzzling” as there were no “fraud allegations” in the commission’s complaint, nor did any evidence of fraudulent acts by the blockchain firm arise at the time the case was in litigation.

Rather, the SEC commissioner claimed that LBRY employed a “more conservative” approach than most crypto firms, as the LBRY blockchain only began operations following the sale of most LBC tokens.

In addition, Peirce also criticized the SEC for initially proposing a penalty of $44 million following its victory over LBRY, a fine that the commissioner claims to be disproportionate to the “alleged crime.” Only following the remedies hearing at the court did the SEC revise its penalty request to $111,614. 

Peirce Urges SEC To Build Regulatory Framework For Crypto Space

In the statement on October 27, Peirce also stated there is no defined protocol for blockchain companies like LBRY to register their token offerings with the SEC, as the application of securities law to crypto projects is still unclear. 

Peradventure if a company was able to even register its token offering, Peirce described such an act as not being a “particularly useful effort.” Rather than launching a lawsuit against LBRY, Peirce claims the SEC could have redeployed its resources into working on a well-defined regulatory framework applicable to crypto projects such as LBRY.

Peirce said:

The time and resources we expended on this case could have been devoted to building a workable regulatory framework that companies like LBRY could have followed. Then, the market could have decided LBRY’s fate.