SEC's 2Z Ruling: DePIN's Utility Tokens Cleared for Innovation

The U.S. Securities and Exchange Commission (SEC) has issued a landmark no-action letter to DoubleZero, confirming that its 2Z token, designed for use in a decentralized physical infrastructure network (DePIN), will not be treated as a security under U.S. law. The decision, announced on September 29, marks the first public acknowledgment by the SEC that a DePIN token can be distributed without triggering securities registration requirementstitle1^[1]. The no-action letter, signed by Michael P. Seaman of the Division of Corporation Finance, states the agency will not recommend enforcement action if DoubleZero's programmatic transfers of 2Z adhere to the framework outlined in its legal submissiontitle3^[3]. Notably, the SEC also confirmed that 2Z does not need to be registered as a class of equity securities under Section 12(g) of the Exchange Acttitle1^[1].

The ruling hinges on the token's functional design, which emphasizes utility over equity-like ownership. DePIN tokens, such as 2Z, are distributed as compensation for services like bandwidth provision, storage, or energy sharing, rather than as investments seeking profit from others' effortstitle4^[4]. SEC Commissioner Hester Peirce emphasized that these tokens do not meet the criteria of the Howey Test, the legal standard defining securities under U.S. law. She argued that treating DePIN tokens as securities would stifle innovation in decentralized infrastructure projects, which rely on distributed networks of contributorstitle2^[2]. The SEC's stance aligns with Peirce's broader view that blockchain technology should not be forced into traditional financial regulatory frameworks, as market dynamics-not regulators-should determine the success of infrastructure-based projectstitle4^[4].

The decision provides immediate clarity for DePIN developers and participants. For DoubleZero, the ruling validates its four-month engagement with regulators and allows contributors to participate in its network without securities law concernstitle1^[1]. The company plans to accelerate its goal of building decentralized infrastructure, including a fiber network to scale the Solana blockchain beyond internet latency limits. Binance has announced that 2Z will debut on its exchange on October 2, with a limited airdrop for eligible users and staking incentives. Analysts note that the SEC's approach contrasts with its historically enforcement-driven strategy, signaling a shift toward fostering innovation while maintaining statutory boundariestitle10^[8].

The no-action letter also sets a precedent for other DePIN projects. By distinguishing utility tokens from securities, the SEC offers a regulatory pathway for developers to launch decentralized infrastructure networks without defaulting to fundraising mechanicstitle5^[5]. This clarity could spur growth in sectors like telecom, energy, and data storage, where DePIN models aim to replace centralized providers. Austin Federa, co-founder of DoubleZero, highlighted that the decision proves U.S. innovators can engage regulators to achieve clarity while maintaining speed in development.

The ruling reflects broader regulatory shifts under the Trump administration, which has prioritized crypto-friendly policies. SEC Chair Paul Atkins has advocated for a "regulation by innovation" approach, collaborating with the Commodity Futures Trading Commission (CFTC) to define oversight roles in digital assetstitle5^[5]. The agency's recent Project Crypto initiative aims to position the U.S. as a global leader in digital assets, with a focus on proactive regulation over reactive enforcementtitle5^[5]. These efforts align with a broader agenda to modernize financial frameworks, including streamlined listing standards for spot crypto ETFs and expedited approvals for commodity-based truststitle10^[8].

While the DePIN market has seen mixed short-term reactions-tokens in the sector dropped 2% in the 24 hours following the announcement-industry participants view the SEC's decision as a milestone. It underscores a regulatory environment increasingly open to utility-driven tokens, provided they avoid speculative or investment-oriented structures. As DePIN projects expand, the SEC's framework could serve as a blueprint for balancing innovation with investor protection, ensuring decentralized infrastructure development remains unimpeded by overly broad securities law interpretations.