Much Ado About DeFi

Given that the charged entity's name included "DeFi," there was an inevitable flurry of news around last week's SEC action against DeFi Money Market ("DMM"), including that it was the "first" enforcement action involving Decentralized Finance or DeFi. However, below are a few observations that, to our minds, make the DMM action less remarkable than its billing.

1.  In terms of violating Securities Act Section 5 through unregistered offerings, the March 2021 SEC Complaint against LBRY, Inc. was the first to concern a decentralized platform and its unregistered offering of an associated token. The still-unresolved LBRY action rests on the SEC's conclusion that the LBRY platform was not truly as decentralized as was claimed, and the LBRY tokens it sold were thus unregistered securities. Rather than functioning autonomously and in distributed fashion, the SEC alleged: (i) the platform and its participants substantially relied on LBRY, Inc.'s managerial and operational