SEC Moves to Dismiss Dragonchain Lawsuit, Reflecting Shift in Crypto Regulation

The SEC plans to dismiss its lawsuit against Dragonchain for unregistered securities, citing the need for a better regulatory framework for crypto. Initially, the SEC claimed Dragonchain raised $16.5 million improperly through DRGN tokens. The move aligns with a broader trend of the SEC retreating from several cryptocurrency lawsuits since Trump took office.

The US Securities and Exchange Commission (SEC) is moving to drop its lawsuit against Dragonchain, a blockchain firm previously accused of failing to register its crypto securities offering. This decision marks a significant retreat for the SEC, reflecting changing dynamics in the agency’s regulatory approach towards cryptocurrency. On April 24, a joint stipulation with Dragonchain was submitted in a Seattle federal court, where the SEC expressed that dismissing the case is appropriate given their ongoing work on a regulatory framework for crypto assets.

The SEC originally filed against Dragonchain, Inc., its backing body Dragonchain Foundation, and Joseph Roets, the company’s founder, back in August 2024. The agency claimed they raised $16.5 million through an unregistered sale of DRGN tokens, asserting these were considered securities as per investment laws. According to the SEC, $14 million was garnered during a presale in August 2017 and an initial coin offering that took place shortly thereafter in the fall.

It’s noteworthy that further sales of the DRGN token, totaling $2.5 million, occurred between 2019 and 2022. The SEC alleged that these funds aided in covering business expenses and supporting technological development. There was a pause on legal proceedings in October 2024 after Dragonchain proposed a settlement, which got extended in January this year in light of a presidential executive order from Trump concerning digital assets.

Interestingly, the news of the SEC’s possible dismissal sent Dragonchain’s DRGN token soaring about 95% in a single day, pushing its value to over 8.5 cents. However, it is still down roughly 98.5% from its all-time high of $5.46 in January 2018, as per CoinGecko’s data.

This case is part of a broader trend, as the SEC has shifted its stance on several crypto cases during Trump’s administration. The regulator established a Crypto Task Force shortly after Trump’s return to office, aiming to enhance its regulatory engagement with the crypto sector. Subsequent memos reveal meetings with Dragonchain representatives also took place in March to discuss how the SEC should move forward with its regulatory stance.

The SEC has already discontinued some major lawsuits against various prominent cryptocurrencies, including Coinbase and Ripple. Investigations into other companies, like OpenSea and Crypto.com, have also been dropped without any subsequent actions planned. This creates a bit of a messy landscape for future crypto regulations and leaves a host of questions unanswered about the SEC’s long-term approach.