SEC Statement On Proof-Of-Work Mining Activities

On March 20, 2025, the SEC’s Division of Corporation Finance (“CorpFin”) issued a statement on certain proof-of-work mining activities.  Illustrating CorpFin’s evolving understanding of the digital world, the statement drills down to a very specific aspect of the crypto mining industry.

The CorpFin statement “addresses the mining of crypto assets that are intrinsically linked to the programmatic functioning of a public, permissionless network, and are used to participate in and/or earned for participating in such network’s consensus mechanism or otherwise used to maintain and/or earned for maintaining the technological operation and security of such network.” In the statement, CorpFin refers to these mined crypto assets as “Covered Crypto Assets” and the mining as “Protocol Mining.”

Protocol Mining

Networks utilizing Protocol Mining are governed by computer code eliminating the need for designated trusted intermediaries.  The programmed software enforces certain network rules, technical requirements, and rewards distributions.  Public, permissionless networks allow anyone to participate in the network’s operation, including the validation

Security or Utility Token? A Case Study – Part I

Is it a security or is it a utility, currency, commodity or some other digital asset? That question has been continuously raised by those working with digital assets such as cryptocurrencies, virtual coins and tokens, including by digital asset issuers and companies that run platforms for the issuance or trading of such digital assets. Although the first and easy answer is that if a digital asset is being issued today, it is most assuredly a security upon issuance that needs to comply with the federal securities laws, the answer is not always that straightforward for digital assets that have been in the marketplace for a period of time, such as bitcoin and ether, or for new digital assets that are carefully being constructed to fall outside the purview of a securitized token.

The “STO” standing for security token offering has quickly gained favor alongside “ICO” with an industry-understood distinction. An STO is designed to

The Senate Banking Committee’s Hearing On Cryptocurrencies

On February 6, 2018, the United States Senate Committee on Banking Housing and Urban Affairs (“Banking Committee”) held a hearing on “Virtual Currencies: The Oversight Role of the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission.” Both SEC Chairman Jay Clayton and CFTC Chairman J. Christopher Giancarlo testified and provided written testimony. The marketplace as a whole had a positive reaction to the testimony, with Bitcoin prices immediately jumping up by over $1600. This blog reviews the testimony and provides my usual commentary.

The SEC and CFTC Share Joint Regulatory Oversight

The Banking Committee hearing follows SEC and CFTC joint statements on January 19, 2018 and a joint op-ed piece in the Wall Street Journal published on January 25, 2018 (see HERE). As with other areas in capital markets, such as swaps, the SEC and CFTC have joint regulatory oversight over cryptocurrencies. Where the SEC regulates securities and securities markets, the CFTC

What Is A Security? The Howey Test And Reves Test

ABA Journal’s 10th Annual Blawg 100

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Sometimes it’s good to go back to basics.  In my blogs I often refer to the registration and exemption requirements in the Securities Act of 1933, as amended (“Securities Act”).  Section 5 of the Securities Act makes it unlawful to offer or sell any security unless a registration statement is in effect as to that security or there is an available exemption from registration.  Similarly, I often refer to the broker-dealer registration requirements.  To be a “broker” or “dealer,” a person must be engaged in the business of effecting transactions in securities.

In today’s small cap world corporate finance transactions often take the form of a convertible note and/or options and warrants, the conversion of which relies on Section 3(a)(9) of the Securities Act.  Section 3(a)(9) is an exemption available for the exchange of one security for another (such as a convertible note for common stock).  Likewise, Rule 144(d)(3)(i) allows the tacking of