The Division of Corporation Finance of the U.S. Securities and Exchange Commission (SEC) has issued a statement on proof-of-work cryptocurrency mining, clarifying that neither solo mining nor pool mining implicates the securities laws.
Bitcoin mining does not involve a reasonable expectation of profits. Miners contribute their own computational resources in order to earn rewards and secure the network. When it comes to pool mining, any potential expectations of profits are not derived from the efforts of pool operators.
Some of the activities of the pool operators that can benefit miners do not satisfy the Howey Test.
Bitcoin is by far the biggest proof-of-work cryptocurrency. Some other examples of coins that fall into this category include Dogecoin (DOGE), Litecoin (LTC), and Monero (XMR).
Related
Back in June 2018, the SEC stated that both Bitcoin and Ethereum were not securities. When it comes to Bitcoin, this view was also repeatedly re-affirmed by former SEC Chair Gary Gensler, who was known for his notoriously anti-crypto stance.
However, Ethereum’s legal status became more complicated after the flagship altcoin transitioned to proof-of-stake back in December 2020. Gensler would repeatedly dodge questions about whether or not the token is a security.
The most recent statement related to proof-of-work is the SEC’s latest effort to bring regulatory clarity to the industry.
In a sharp policy reversal, the SEC has now dropped several lawsuits against such prominent companies as Kraken and Coinbase. The agency has also abandoned its appeal against Ripple.
