SEC To LBRY: "You're Overdue." Recent Enforcement Action Highlights Evolving SEC Focus On Decentralization

"Decentralization" is a concept that has consistently vexed the entire blockchain-enabled ecosystem in the U.S., including its counsel and regulators, wherein a lack of clarity on the exact definition of decentralization has left relevant stakeholders routinely talking past one another. As such, market participants have been eagerly waiting for the U.S. Securities and Exchange Commission (the SEC) to explain the agency's understanding of what it means for a blockchain-enabled network to be "sufficiently decentralized." Based on the SEC's recent enforcement action, it looks like the agency is getting ready to take a deep dive.

On March 29, 2021, the SEC filed charges in federal district court in New Hampshire against LBRY, Inc. ("LBRY"), the developer of a purportedly decentralized, peer-to-peer network that enables users to host and share video content. The SEC alleges that LBRY engaged in an unregistered offering of securities by raising more than $11 million