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Invezz 2025-12-19 08:59:15

SEC says Bitcoin mining hosting deals may qualify as securities in recent lawsuit

The US Securities and Exchange Commission has said in a recent lawsuit that third-party Bitcoin mining hosting agreements may be classified under federal securities laws. The commission’s position surfaced during a Delaware lawsuit where the regulator had sued VBit Technologies and its founder Danh Vo for defrauding thousands of investors between 2018 and 2022 by overselling mining contracts and misappropriating funds. According to the complaint , the nature of the arrangements make VBit’s hosting offerings “investment contracts,” which the SEC argues are securities because they meet the definition outlined in the Howey test. Per the Howey test, any scheme that involves an investment of money in a common enterprise with an expectation of profits derived from the efforts of others may be considered a security. The SEC argues that VBit’s contracts are clear “investment contracts” that were “offered and sold in exchange for money,” and constituted investments in a “common enterprise,” where Vo led “investors to expect profits derived from the efforts of third parties.” “VBit’s efforts performed in connection with the Hosting Agreements were entrepreneurial and managerial,” the SEC said, adding that “investors who purchased Hosting Agreements did so with the expectation of earning passive income and relied exclusively on VBit’s efforts to earn a profit as the investors did not possess, control, or have agency over the mining rigs they purportedly purchased.” As such, the SEC has concluded that the hosting agreements qualify as unregistered securities offerings and is pursuing a fraud and registration violation case against Vo. While some industry experts like Mitchell Askew argue that Bitcoin mining is a commodity activity and not a security offering, the commission’s view could still set a precedent for how similar passive mining arrangements are treated under federal law. SEC’s stance has evolved since Biden era Under the previous administration led by former President Joe Biden, the SEC categorized the vast majority of crypto products and services as securities under its regulation by enforcement approach. The SEC led by Gary Gensler at the time was criticised by the industry for lacking clear rules and for choking innovation through lawsuits. Throughout that period, the agency pursued at least 125 crypto enforcement cases and raked in over and estimated $6 billion in penalties, with nearly a hundred settlements. However, that approach has since been rolled back under the current administration, with the SEC now being led by pro-crypto chair Paul Atkins. Atkins has publicly clarified that most crypto tokens are not securities once their networks become sufficiently decentralized, and as such the SEC has withdrawn or stayed more than half of the crypto cases it inherited from the previous administration. Other key regulatory amendments introduced by the commission this year include the rescission of SAB 121, which had previously discouraged banks from offering crypto custody by requiring them to classify client assets as liabilities on their balance sheets. The post SEC says Bitcoin mining hosting deals may qualify as securities in recent lawsuit appeared first on Invezz

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