ICANN, an internet body responsible for overseeing the domain name system that underpins the web, today blocked a deal that would have given an investment firm control over the world’s .org domains.

The Internet Society, the nonprofit that runs the .org registry, last year announced plans to hand over control to investment firm Ethos Capital as part of a $1.1 billion transaction. A subsidiary of the Internet Society called the Public Interest Registry owns the registry.

That subsidiary, in turn, has a contract with ICANN that requires ICANN to give its approval before any change in ownership can take place. That’s what enabled the internet body to block the deal.

More than 10 million .org domains are registered worldwide, mainly by nonprofits. Nearly 900 of those organizations, including NPR and the Wikimedia Foundation, signed a public letter urging the Internet Society to not go through with the sale. 

In a statement explaining its decision, ICANN’s board said that “the public interest is better served in withholding consent as a result of various factors that create unacceptable uncertainty over the future of the third largest gTLD (generic Top Level Domain) registry.”

One of the factors the body cited is that the proposed acquisition terms would have required the Public Interest Registry to take out a $360 million loan. “The incurrence of this debt was not for the benefit of PIR or the .org community, but for the financial interests of the Internet Society, Ethos Capital, and other investors in the transaction,” ICANN’s board stated.

The body also said there was a lack of transparency about the identities of Ethos Capital’s investors and its future plans for .org domains. Moreover, ICANN noted that the investment firm has no track record of successfully operating a domain name registry, among other reasons because it was only incorporated in May of 2019.

Not least of the considerations that influenced ICANN’s decision is the scrutiny the proposed sale was starting to draw from authorities. ICANN, which is based in Los Angeles, last month received a letter from California Attorney General Xavier Becerra urging it to reject the deal. Pennsylvania Attorney General Josh Shapiro was also investigating the transaction because the Public Interest Registry is based in the state.

The Electronic Frontier Foundation, which was a signatory to the public letter opposing the deal, hailed ICANN’S decision as a “stunning victory for nonprofits and NGOs around the world” in a blog post today. 

The Internet Society, in turn, issued a statement expressing disappointment with the move. The body said that “we stand by our decision in favor of the transaction to unlock the full potential of the Internet Society, PIR, .ORG community, and ultimately the Internet.”

Photo of ICANN headquarters: Coolcaesar/Wikimedia