SEC Clarifies PoW Mining Not Subject to Securities Laws

The U.S. Securities and Exchange Commission’s (SEC) Division of Corporate Finance has issued new guidance on Proof-of-Work (PoW) mining, clarifying the application of federal securities laws to these activities. The guidance, released on March 20, 2025, aims to provide clarity on the regulatory framework for crypto mining, ensuring that these activities comply with existing laws. The SEC's statement specifically addresses the "mining of crypto assets that are intrinsically linked to the programmatic functioning of a public, permissionless network." It determines that decentralized PoW networks should not be treated as securities, provided they meet certain criteria.

The SEC's clarification confirms that mining on public, permissionless networks is not subject to securities regulations. This view applies to solo miners and mining pools participating in such networks. The guidance outlines the legal implications and requirements for compliance, providing a clear framework for traders and companies involved in PoW mining. The SEC's Division of Corporation Finance gives its view on PoW “protocol mining activities,” emphasizing that these activities do not constitute “the offer and sale of securities” as outlined in the Securities Act of 1933.

The guidance does not name any specific blockchain but applies to permissionless networks where mining is used to participate in the consensus mechanism. This clarification is significant for major cryptocurrencies like Bitcoin, Dogecoin, Litecoin, and Monero, which are based on PoW. U.S. regulators have long considered Bitcoin to be a commodity and not a security, a view that also extends to Litecoin and Dogecoin.

The SEC indicates that PoW networks are decentralized, permissionless networks where miners validate transactions and secure a network through computational effort. One of the key takeaways is the understanding that mining activity is required for blockchain functionality and is not contingent on the managerial expertise of a third party—a consideration that is critical in the Howey Test, which determines if an asset is a security.

The SEC also touched on the role of mining pools, where miners aggregate computational resources to increase block reward opportunities. Since mining pool operators allocate resources, maintain infrastructure, and distribute profits, the SEC describes their role to be kept administrative in scope and not managerial. This will enable participation in mining pools so that the activity will not be re-characterized as an investment contract.

This regulatory reading is a welcome relief to U.S.-based miners. By confirming that PoW mining falls outside securities regulations, the SEC dispels doubt regarding the compliance requirement. The decision can strengthen confidence among mining companies, especially since the industry is facing more pressure in terms of power usage and environmental impact. The clarification is a crucial step toward granting regulatory clarity to the growing crypto-mining sector.

The SEC's guidance is part of a broader pro-crypto policy tailwind under the current administration. The U.S. President has vowed to make the country the world’s blockchain and crypto capital. In addition to appointing a pro-crypto replacement to Gary Gensler at the SEC, the president has established the Council of Advisers on Digital Assets to advance common-sense regulations for the industry. This proactive approach by the administration signals a supportive regulatory environment for digital asset markets, including PoW chains, which are set to flourish under these conditions.