Crypto: The SEC Tightens The Noose, Mining Now Classified As A Security

In a decision that could upend the crypto mining industry, the Securities and Exchange Commission (SEC) has just scored a decisive point. A federal court has affirmed the agency’s stance that certain mining devices can be considered securities.

A redefinition of the legal status of crypto mining

The SEC is intensifying its scrutiny of the crypto sector by expanding its definition of securities. In a recent lawsuit against Green United LLC, the agency argued that mining equipment, coupled with hosting agreements, constitute investment contracts.

This interpretation is based on the Howey test, established by the Supreme Court in 1946, which defines an investment contract as an investment of money in a common enterprise with an expectation of profits derived solely from the efforts of others.

According to the SEC, the “Green Boxes” sold by Green United, associated with the promise of returns generated by the company, meet these criteria.

Judge Ann Marie McIff Allen of the Utah District Court validated this position by dismissing Green United’s motion to dismiss the case. She found that the SEC had “sufficiently alleged a security in the form of Green Boxes coupled with a Hosting Agreement.“

Major implications for the mining industry

This classification of mining equipment as securities represents a significant shift in the SEC’s regulatory approach. Until now, the debate has mainly focused on the status of the cryptos themselves.

By extending its reach to mining hardware, the SEC is considerably strengthening its grip on the crypto industry. This decision could require companies offering mining services to register with the SEC and adhere to stricter disclosure requirements.

This decision also raises questions about the viability of many business models in the crypto mining sector. Companies will likely need to review their offerings and marketing practices to avoid potential lawsuits for selling unregistered securities.

In sum, this legal victory for the SEC marks a turning point in the regulation of the crypto sector in the United States. It probably heralds a wave of new lawsuits and could force a major restructuring of the mining industry.