The U.S. Securities and Exchange Commission announced on March 20 that Bitcoin mining does not fall under securities and does not require registration.
In a statement, the SEC’s Division of Corporation Finance stated that “Protocol Mining” on proof-of-work (PoW) networks does not meet the criteria of an “investment contract” under the Howey Test, a legal standard for determining securities.
The announcement cleared the fog for miners and mining companies, stating that mining operations would not be subject to securities laws.
According to the SEC, Bitcoin miners, whether solo or part of a mining pool, are not engaging in investment activities that depend on the managerial efforts of others. Instead, miners independently contribute computational power to secure the network and validate transactions, earning rewards in the form of newly minted Bitcoin.
“A miner’s expectation to receive rewards is not derived from any third party’s managerial or entrepreneurial efforts upon which the network’s success depends,” the statement clarified.
The SEC further stated that mining pools, which aggregate computational resources to increase the likelihood of mining new blocks, do not change the fundamental nature of mining.
Even in a pool, “individual miners still perform the actual mining activity by contributing their computational power to solve cryptographic puzzles.” Pool operators primarily serve administrative functions, distributing rewards proportionally to contributors.
The SEC’s decision is for both individual miners and mining pools. Solo miners validate transactions and earn Bitcoin from their own computing resources.
A mining pool comprises several miners who share their resources to gain a better chance of solving the puzzle and are rewarded. Mining pools and their operators are not considered securities issuers because miners are still dedicating computational power rather than relying on the efforts of others, the agency also confirmed.
