SEC Clarifies Proof-of-Work Mining Does Not Violate Securities Laws

Highlights:

• The SEC confirmed PoW mining does not involve the sale of securities.
• Miners earn rewards through personal efforts, not third-party management.
• Trump’s administration revised crypto regulations and SEC enforcement policies.

In a statement on Thursday, the U.S. Securities and Exchange Commission’s Division of Corporation Finance clarified its stance on proof-of-work (PoW) crypto mining. The regulator stated that these activities are not considered “the offer and sale of securities.”

According to the agency, participants in mining activities do not need to register transactions with the Commission under the Securities Act. It also clarified that these activities do not require an exemption from registration under the Securities Act. The SEC’s statement does not mention any specific blockchain. However, its stance on PoW activities applies to permissionless networks that use mining for consensus. This includes both solo miners and mining pools operating in these networks.

Proof-of-work is a type of consensus mechanism, like proof-of-stake. It requires miners to use computing power to solve cryptographic puzzles and compete with others. Miners receive newly minted cryptocurrency as rewards, which the statement refers to as “Covered Crypto Assets.” Bitcoin, the biggest cryptocurrency by market value, runs on proof-of-work.

The SEC issued a statement clarifying that mining and mining pool activities under the PoW mechanism do not constitute securities offerings. The statement asserts that Protocol Mining on PoW networks involves only the contribution of computational resources, rather than reliance…

— Wu Blockchain (@WuBlockchain) March 20, 2025

Why Proof-of-Work Mining Is Not Classified as a Security

The decision is based on the Howey Test, a legal framework used to determine whether an asset qualifies as an investment contract and, therefore, a security. The test evaluates four key criteria: an investment of money, participation in a common enterprise, an expectation of profits, and profits derived from the efforts of others. Miners invest in hardware and electricity, which satisfies the first criterion, and they anticipate earning rewards, fulfilling the third. 

However, the SEC concluded that proof-of-work mining does not meet the “derived from the efforts of others” requirement. In PoW mining, profits come directly from the miner’s individual computational work rather than the managerial or entrepreneurial efforts of a third party. As a result, PoW mining activities are not considered securities transactions and do not require SEC registration.

 The SEC said:

“A miner’s Self (or Solo) Mining is not undertaken with a reasonable expectation of profits to be derived from the entrepreneurial or managerial efforts of others.”

The SEC’s statement provides regulatory certainty, which could attract more institutional investors to the Bitcoin mining sector.

Shifting U.S. Crypto Regulations Under the Trump Administration

The SEC’s clarification on proof-of-work mining comes as U.S. regulations shift under President Donald Trump’s administration. Since Trump took office in January, it has made several changes. After crypto-skeptic former SEC Chair Gary Gensler left, the agency took new steps. It rescinded controversial crypto accounting guidance and dropped enforcement actions against key industry players. It also released a statement on memecoins and reviewed rules affecting crypto.

Republican acting Chair Mark Uyeda has formed a crypto task force. Commissioner Hester Peirce will lead the group. They are set to meet on Friday to discuss the “security status” of crypto assets. Trump recently reiterated his commitment to making the U.S. a leader in Bitcoin and digital assets. On March 20, he delivered a video statement at the Digital Asset Summit in New York. This was the first time a sitting United States president addressed a crypto-focused industry event.