SEC Lawsuit Puts DASH in the Spotlight: Is it an Investment Contract?

The US Securities and Exchange Commission’s (SEC) lawsuits against major cryptocurrency exchanges Binance and Coinbase has sparked discussions about the coins that are listed as investment contracts . Unexpectedly, among the various tokens including metaverse and DeFi coins the only Proof-of-Work (PoW) coin on the list was DASH which is a familiar name to former crypto investors .

DASH and its Relationship with the Dash Core Group

The SEC’s court documents shed light on the reasons why DASH which is a coin that has gained popularity in the South American region and has been used for payments, was classified as an investment contract . The case file specifically mentions the Dash Core Group (DCG) and highlights the role of Masternodes which provide additional security services in the DASH network . The court file states that: “Masternodes indirectly control DCG through their voting power . The developments made by DCG to the DASH platform also contribute to the value of the DASH token . As a result token holders benefit from these improvements . Therefore the valuation of tokens that are held by individuals other than Masternodes is dependent on the valuation of Masternodes and DASH held by DCG .”

The SEC argues that DASH investors have invested in the hope that the token’s value would increase because of the work that was done by DCG and Masternodes and thus boosting demand and driving up the token’s value .

DASH’s Investment Contract Status and SEC’s Perspective

SEC Chairman Gary Gensler has constantly stressed that investment contracts are formed when individuals invest in assets with the expectation that their value will increase thanks to the efforts of a group or individual . Gensler asserts that Bitcoin doesn’t fall into the category of an investment contract as it lacks a centralized structure .

As the debate continues it remains to be seen how the court proceedings will advance and whether DASH will be officially classified as an investment contract . The outcome of the case will have implications for not only DASH but also other cryptocurrencies in the market as regulatory clarity is sought .