SEC v. LBRY Foundation Inc., 26 F.4th 96

LBRY, Inc. launched the blockchain-based LBRY Protocol and issued LBRY Credits (LBC), offering and selling LBC without registering under the Securities Act.
The SEC sued LBRY alleging LBC are unregistered securities (investment contracts under Howey). LBRY denied and argued LBC are not securities.
In 2019 LBRY created LBRY Foundation Inc. and granted it 5 million LBC; Foundation’s sole assets are LBC and it awards LBC to contributors to the network.
Foundation moved to intervene in the SEC enforcement action to present a distinct defense attacking the SEC’s definition of “enterprise” under Howey; both the SEC and LBRY opposed intervention.
The district court denied intervention; Foundation appealed, arguing denial was an abuse of discretion.
The First Circuit affirmed, holding the district court did not abuse its discretion because LBRY adequately represents Foundation’s interests and a desire to advance additional or different legal arguments does not overcome the presumption of adequate representation.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Foundation may intervene as of right under Rule 24(a)(2)	Foundation lacks a protectable interest; existing parties adequately represent any interest	Foundation has a direct stake in LBC and must raise an "enterprise" challenge distinct from LBRY's defenses	Denied; no abuse of discretion — LBRY adequately represents Foundation, so intervention as of right fails
Whether the presumption of adequate representation applies and can be rebutted	Presumption applies because Foundation and LBRY share the objective to defeat the SEC claim	Foundation says different legal theory (attacking "enterprise" element) and tactics rebut adequacy	Presumption applies; mere additional/alternative arguments or tactical differences do not rebut it
Whether Foundation has a "concrete interest" sufficient for Rule 24(a)(2)	Foundation lacks a protectable, concrete interest in the litigation	Foundation points to its LBC holdings as a concrete interest	Court did not decide this question on appeal; affirmed on adequacy-of-representation ground
Whether possibility of settlement makes LBRY an inadequate representative	LBRY will adequately represent; no record support that it would settle contrary to Foundation’s interest	Foundation argued LBRY might settle and thus not protect Foundation's interest	Settlement argument waived on appeal; speculative settlement insufficient to show inadequate representation

SEC v. W.J. Howey Co., 328 U.S. 293 (1946) (establishes the test for an "investment contract" under the Securities Act)
T-Mobile Ne. LLC v. Town of Barnstable, 969 F.3d 33 (1st Cir. 2020) (standard and factors for intervention and review of district-court intervention rulings)
Victims Rts. L. Ctr. v. Rosenfelt, 988 F.3d 556 (1st Cir. 2021) (discussion of Rule 24(a) intervention standards)
Daggett v. Comm'n on Governmental Ethics & Election Practices, 172 F.3d 104 (1st Cir. 1999) (presumption of adequate representation and when it can be rebutted)
Students for Fair Admissions, Inc. v. President & Fellows of Harvard Coll., 807 F.3d 472 (1st Cir. 2015) (application of the presumption of adequate representation)
R & G Mortg. Corp. v. Fed. Home Loan Mortg. Corp., 584 F.3d 1 (1st Cir. 2009) (elements required for intervention as of right)
Butler, Fitzgerald & Potter v. Sequa Corp., 250 F.3d 171 (2d Cir. 2001) (difference in litigation tactics does not establish inadequate representation)