April 25, 2025

The law firm Martin Davis, PLLC (“Martin Davis”) and Dragonchain are pleased to announce that the United States Securities and Exchange Commission (“SEC”) has agreed to dismiss, with prejudice, its lawsuit against Dragonchain, Inc., The Dragon Company, the Dragonchain Foundation, and Joe Roets (collectively, “Dragonchain”). The SEC began investigating Dragonchain’s Initial Coin Offering (“ICO”) in 2017 and subsequently filed a civil suit against Dragonchain in the United States District Court for the Western District of Washington in 2022 for failure to register its utility token — DRGN — as a “security” or seek exemption from registration requirements under the ’33 Act. The SEC claimed that Dragonchain’s native token, DRGN, was an investment contract (i.e., a security), and, therefore, its issuance violated the ’33 Act and the standard for determining what constitutes an “investment contract” as set forth in SEC v. Howey, 328 U.S. 293 (1946). Throughout the yearslong investigation process and during discovery, Dragonchain cooperated and complied fully with the SEC’s requests. This litigation has cost Dragonchain millions of dollars in fees and damages and slowed the growth of Dragonchain’s business and its protocol.

“The SEC’s decision to dismiss this matter and release all relevant parties represents significant progress in the ongoing effort in the legal/crypto community to distinguish between the characteristics of crypto assets and how they apply to the foundational principles of securities law. Crypto assets (i.e., digital representations of value) include, for example, digital assets (BTC), digital currencies (USDC/USDT), digital tokens (utility/access tokens such as DRGN) and digital securities (digital versions of stocks/bonds). Today’s dismissal underscores the fact that the SEC recognizes that not all digital assets are securities and, therefore, their issuance is not in violation of the ’33 Act or otherwise impacted by the Howey test,” according to David M. Otto, Managing Partner of Martin Davis.

Martin Davis was retained at the time the lawsuit was filed against Dragonchain in 2022, five years after the ICO. Martin Davis crafted a litigation strategy around the fact that (i) DRGN is a utility token with several United States Patents related to its utility, interoperability, security, and scalability on the Dragonchain platform, and (ii) DRGN is not a security due to, among other things, its status as a utility token. While we maintained throughout this exhausting ordeal that DRGN did not satisfy the criteria to be classified as a security under the Howey test — specifically whether the DRGN utility token constituted an investment contract — today’s result confirms and aligns with our legal strategy that the DRGN tokenized micro-license does not constitute any type of investment contract and, therefore, is not a security.

“Dismissal is a major win for the rule of law, a vindication of our position, and will help ensure American remains a leader in the global crypto landscape,” said Benjamin York, Senior Associate Attorney at Martin Davis. The SEC’s dismissal of the lawsuit (by stipulation of the parties) is a clear win for Dragonchain and the blockchain community writ large. It also confirms that the SEC is actively reevaluating and dismissing questionable enforcement actions.

The civil case was formally terminated by the United States District Court for the Western District of Washington on April 25, 2025. For more information on Dragonchain and its protocol, please visit: https://dragonchain.com/.

Martin Davis, PLLC
David M. Otto, Managing Partner
Benjamin F. York, Sr. Associate Attorney
Attorneys for Dragonchain et al.