Great story from New Hampshire Bulletin about the latest legal challenge for LBRY, a New Hampshire startup for file-sharing that uses “tokens” which regulators say act like securities and should be regulated as such. It has an interesting historical backdrop with legal rulings that were based on citrus growing, of all things. The whole story is here. A tidbit:
In order to build that platform, the company’s founders self-funded the effort, and raised a “small amount” of funds from angel investors and venture capital firms, according to court filings. When the platform launched in 2016, the company also launched credits, known as LBC, which users can purchase in order to buy and upload content on the platform.
The SEC argued the credits are the backbone of the company’s finances and function primarily as investment contracts, because they can rise and fall in value and can be sold for profit. The commission has pointed to statements made by Kauffman and others that noted the value of the LBRY credits was tied to the value of the company and the ability of the company’s founders to improve the company.
That distinction is crucial, according to Carol Goforth, a University of Arkansas professor and a leading U.S. scholar on cryptocurrency regulation. Cryptocurrencies such as Bitcoin do not need to be regulated as securities because their value is not tied to a company or representative, Goforth said in an interview. But crypto assets whose value depends directly on one company’s performance do meet the standard for securities, she said.