Rejection of the Fair Notice Defense. Judge Barbadoro resoundingly rejected LBRY’s complaint that the SEC had not provided adequate notice that (at least certain) tokens are securities. He found that the SEC’s claims were based on a “straightforward application of a venerable Supreme Court precedent that has been applied by hundreds of federal courts across the country over more than 70 years.” As the SEC noted in its motion for summary judgment, “[n]o federal court has ever found that the term ‘investment contract,’ as used in the Securities Act and as construed in Howey, is unconstitutionally vague.” So far, the fair notice argument has not gained any traction with the courts.
SEC v. LBRY is yet another victory for the SEC, and a reminder of some of the risks and uncertainties for digital asset innovators. But as a single district court decision based on facts and circumstances unique to the case, it may not be the earthquake many fear.
‘Enforcement 40’ for 2020
Join Us On LinkedIn
Join the Securities Litigation and Enforcement Group on LinkedIn