Privacy coin Dash challenges SEC’s labeling of it as a security
The Dash community has hit back at the US Securities and Exchange Commission (SEC) after the regulator included the privacy-focused cryptocurrency in a list of six altcoins it accused of being securities.
The SEC’s latest crackdown targeted crypto exchange Bittrex, accusing it of selling unregistered securities, and also listed Dash and five other altcoins, including the OMG Network, Algorand, Monolith, NAGA, and IHT Real Estate Protocol, as securities.
Dash community disputes SEC’s claims
The Dash Community account responded to the SEC’s claim on 18 April, stating that no reasonable interpretation would call Dash security.
According to the SEC, an asset is deemed a security if it meets the archaic Howey Test, which requires an investment contract and profit expectations from a joint enterprise.
However, the Dash community pointed out that there was no reasonable expectation of profits with Dash, as it is primarily a payments technology that compensates miners and master nodes for their work. The network is also governed by a decentralized autonomous organization (DAO), which collectively decides its direction rather than a specific group promising the efforts of others.
The Dash community also highlighted several flaws in the SEC’s arguments, including that the “Dash Control Group” was a fictitious entity and that the Dash Core Group did not exist until 2017. Furthermore, Dash holders do not expect master nodes to generate profits, as master nodes cannot be bought.
The Crypto Rating Council also rated Dash similarly to Bitcoin and Litecoin, indicating that it is least likely to be considered a security.
The Dash community concluded by asserting that peer-to-peer digital cash, financial sovereignty, decentralized governance, and privacy are not crimes and that the SEC appeared to be misunderstanding the technology and reacting to anything crypto-related.
Following the SEC’s announcement, Dash prices dropped by 6% but have since recovered. At the time of writing, Dash was trading at $59.28. However, the privacy token has been barred from many centralized exchanges, leading to a 96% decline from its all-time high of $1,493 in December 2017.
The recent action taken by the SEC against DASH seems to be another instance of the agency’s lack of understanding of cryptocurrency and its knee-jerk reactions to anything related to it.
SEC’s history of targeting crypto violations
This is not the first time the agency has accused individuals and companies of crypto-related securities violations, as evidenced by its lawsuit against former Coinbase employees in 2022, where nine crypto tokens were labeled as securities.
Former Coinbase product manager Ishan Wahi and his brother requested a US court to dismiss the case earlier this year, contending that the SEC’s definition of securities is flawed since it mandates a contract.
The brothers’ lawyers argued that the term “investment contract” requires a contract, which does not exist in this case. They also pointed out that the developers who created the tokens have no contractual obligations to the secondary market purchasers, making it impossible to have an “investment contract.”
The SEC is expected to respond to this motion during the summer.