On 20 March 2025, the Division of Corporation Finance of the United States Securities and Exchange Commission (US SEC) released a detailed statement on Certain Proof-of-Work Mining Activities, offering its views on the application of federal securities laws to crypto asset mining operations, particularly those associated with proof-of-work (PoW) networks. The statement defines the scope of covered activities as those involving the mining of “Covered Crypto Assets” i.e. digital assets that are intrinsically linked to the technological functioning of a public, permissionless PoW network. The term “Protocol Mining” is used to describe the activity by which network participants (miners) validate transactions and earn rewards in the form of newly minted crypto assets in accordance with pre-determined protocol rules. It specifically addresses whether mining activities constitute securities offerings under Section 2(a)(1) of the United States Securities Act of 1933 and Section 3(a)(10) of the United States Securities Exchange Act of 1934. The US SEC’s Division of Corporation Finance’s analysis focuses exclusively on “Protocol Mining” which is defined as the validation of transactions on public, permissionless PoW networks where miners earn “Covered Crypto Assets” as rewards.
In assessing whether mining activities fall within the definition of a “security” under Section 2(a)(1) of the United States Securities Act of 1933 and Section 3(a)(10) of the United States Securities Exchange Act of 1934, the US SEC’s Division of Corporation Finance applied the longstanding Howey test as interpreted by the United States Supreme Court in SEC v. W.J. Howey Co., 328 U.S. 293 (1946). Under Howey test, a transaction is an investment contract, and therefore a security, if there is: (i) an investment of money, (ii) in a common enterprise, (iii) with an expectation of profits derived from the efforts of others.
The US SEC’s Division of Corporation Finance concluded that in the specific context of Protocol Mining described in the statement, miners do not meet the third prong of the Howey test. In self-mining, miners contribute their own computational resources, perform validation independently, and receive rewards determined by the protocol. The Division viewed this as a ministerial or administrative activity and not one in which profits are expected from the managerial efforts of a third party.
According to US SEC’s Division of Corporation Finance, in mining pool arrangements, the same conclusion applies. Although pool operators may coordinate mining efforts and distribute rewards, the Division found that these actions do not constitute the “essential managerial efforts” contemplated by Howey. Instead, the rewards are attributed to the miner’s proportional contribution of computational resources. Therefore, the economic realities, as framed in this statement, do not reflect an investment contract.
US SEC’s Division of Corporation Finance stated that its views are not dispositive for all cases. The statement includes a footnote clarifying that a definitive legal determination would require a facts-and-circumstances analysis, taking into account variations in compensation structures, pool governance, and operator activity. Where those facts diverge from those discussed in the statement, the legal conclusion may differ.
This statement is not legally binding or adopted by the US SEC, but signals the US SEC staff’s current thinking on crypto mining activities. The focus is limited to self-mining and mining pool participation, explicitly excluding PoW variations or protocols with different economic structures. Stakeholders are advised to read the statement in full and direct specific inquiries to the Office of Chief Counsel via the US SEC’s online request form. The full statement and accompanying analysis are available at www.sec.gov.
