"We Lost. Sorry Everyone": The Implications Of A District Court Finding Digital Token, LBC, Is A Security

Crypto litigation, fueled by a surge of investors and market volatility, has ballooned in recent years. For example, numerous securities class actions and government subpoenas followed the May 2022 collapse of the $60 billion Terra network, along with stablecoin TerraUSD and the LUNA token. The following month, the U.S. Department of Justice announced enforcement actions in connection with a NFT scheme. Just last week, a major cryptocurrency exchange filed for bankruptcy.  According to one study, the crypto industry has generated more than 200 class action lawsuits and other private litigations as of May 2022, a 50% uptick since the start of 2020.¹

One oft-repeated question adding to the volatility of the crypto space has been who  should regulate it.  In that vein, the U.S. Securities and Exchange Commission (“SEC”), the U.S. Commodity Futures Trading Commission (“CFTC”), as well as state agencies such as the New York Department of Financial Services, have attempted