The US Securities and Exchange Commission (SEC) is contemplating to withdraw its lawsuit against blockchain company Dragonchain regarding an unregistered securities. The case is related to the firm’s crypto ICO. This move marks another instance of the SEC stepping back from crypto-related litigation.
In a joint agreement submitted alongside Dragonchain to a federal court in Seattle on April 24, the SEC expressed that “the dismissal of this case seems appropriate.” The decision comes after the efforts of the SEC’s Crypto Task Force, which aids in shaping the regulatory framework for crypto assets.
The official document states, “Both the Commission and the Defendants agree that this litigation should be dismissed without prejudice […] and excluding any costs or fees for either party.”
Dragonchain and its supporters, including the Dragonchain Foundation, The Dragon Company, and Dragonchain’s creator, Joseph Roets, were sued by the SEC in August 2024. The agency claimed they raised $16.5 million through a crypto token, which was an unregistered securities offering.
The SEC alleged that Dragonchain (DRGN) tokens generated $14 million in a presale and an initial coin offering (ICO) that occurred in October and November 2017. Furthermore, it said that the firm was required to register as the tokens constituted investment contracts under securities laws.
Additionally, the SEC stated that DRGN tokens worth $2.5 million were sold between 2019 and 2022. According to the agency, these funds were used to cover operational costs and advance the company’s technology.
The lawsuit was put on hold in October when Dragonchain proposed a settlement to the SEC. The pause was extended in January when the agency suggested the case should remain on hold due to President Trump’s comprehensive executive order advocating for the nation’s “leadership in digital assets.”
Following the news of the SEC’s potential dismissal, the DRGN token’s value surged by 95% in a day, reaching over 8.5 cents. However, it’s still down approximately 98.5% from its January 2018 peak of $5.46, as per CoinGecko.
Under Trump’s administration, the SEC has backed off from several cases involving crypto. The SEC’s Crypto Task Force was established in January, a day after Trump returned to the White House, to guide the regulator’s engagement with the crypto industry.
High-profile lawsuits against crypto firms like Coinbase, Ripple, and Kraken have also been dismissed by the SEC. Furthermore, investigations into other crypto firms like OpenSea, Crypto.com, and Immutable have been dropped, with no further action planned.
