The Division of Corporation Finance of the U.S. Securities and Exchange Commission (SEC) has issued a statement on proof-of-work cryptocurrency mining

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.

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.

Specifically, the Division elaborated on why activities of proof-of-work cryptocurrency miners and pool operators do not raise any issues under Section 7 of the Securities Act of 1933 or Section 12 of the Securities Exchange Act of 1934.

The statement also serves to provide insight into how the Division applies the federal securities law in the rapidly evolving digital asset and cryptocurrency sector.

The SEC explained that in the context of Bitcoin, the 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.

Rather, the potential for profit is dependent on the price of Bitcoin, which is determined in the market by buyers and sellers, not the pool operators or other miners.

Some of the activities of the pool operators that can benefit miners do not satisfy the Howey Test. For instance, pool operators may collect and distribute transaction fees to provide liquidity and efficiency to the Bitcoin network, which is an activity that benefits all users of the Bitcoin network.

Bitcoin is by far the biggest proof-of-work cryptocurrency. Some other examples of coins that fall into this category include Dogecoin, Litecoin, and Monero.

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.