SEC Drops Dragonchain Lawsuit, Token Rallies 100%

The United States Securities and Exchange Commission (SEC) has decided to drop its securities lawsuit against Dragonchain, a blockchain platform initially developed by Disney. The dismissal, filed on April 24 in a Seattle federal court, is described as "with prejudice," meaning the case is permanently closed and cannot be refiled. This decision comes after a review by the SEC's Crypto Task Force, which was established to address the evolving landscape of cryptocurrency regulation.

The SEC's decision to dismiss the case is rooted in its evolving approach to crypto oversight. The regulator cited recent developments in its regulatory framework and the work of its Crypto Task Force, which was formed following an executive order by President Donald Trump. The order directed federal agencies to prioritize US leadership in blockchain and digital asset development. The dismissal also follows a meeting between Dragonchain representatives and SEC staff on March 24, where Dragonchain founder Joe Roets presented real-world use cases of blockchain technology beyond finance. These use cases included fraud prevention, identity verification, and secure data tracking, arguing that blockchain should be viewed as foundational software rather than just a tool for fundraising or investment.

Dragonchain is a hybrid blockchain platform that combines the security of public blockchains with the confidentiality of closed networks. Developed by Disney in 2014 and open-sourced in 2016, it supports enterprise-grade applications with modular architecture, smart contracts written in traditional programming languages, and a five-layer consensus model for scalability and trust. Unlike many public chains, Dragonchain does not require all data to be published on-chain, allowing sensitive business logic and data to remain private while verification hashes can be anchored to public blockchains like Ethereum or Bitcoin.

The SEC's lawsuit against Dragonchain, filed in August 2022, centered on the company's 2017 token sale. The agency claimed that Dragonchain, along with its foundation and founder Joe Roets, raised $14 million through a presale and initial coin offering (ICO) of its DRGN tokens without registering them as securities. The SEC argued that DRGN tokens were investment contracts under US securities law and sought penalties, disgorgement, and injunctions. The commission maintained that Dragonchain should have registered the offering, especially since it took place after the agency had issued guidance warning that many ICOs could fall under its jurisdiction.

The dismissal of the case has had a significant impact on the value of Dragonchain's native token, DRGN. Following the news, the token rallied nearly 100%, breaking out of a multi-week downtrend that began earlier this year. While the token is still trading roughly 98% below its all-time high hit in 2018, the recent price surge has sparked optimism among some analysts, who predict an extended rally in the coming weeks. This optimism is partly due to Dragonchain's US origins and the potential for increased adoption of its technology in various industries.