The U.S. Securities and Exchange Commission said Thursday that proof-of-work mining—which underpins Bitcoin and some other blockchain networks—does not violate U.S. securities law.

In its latest guidance to clarify rules for the fast-moving industry, the regulator said that mining operations do not need to register their actions as they “do not involve the offer and sale of securities.”

Securing crypto networks has been a controversial issue in the past, with the SEC under the previous administration declaring that proof-of-stake blockchains like Ethereum and Solana—where crypto holders passively earn returns by pledging coins or tokens to a network—could satisfy the Howey test. 

Under U.S. law, an asset passes the Howey test and meets the definition of a security if it is an investment of money in a common enterprise from which there is an expectation of profit based on that enterprise’s efforts.

But major cryptocurrencies such as Bitcoin, Dogecoin, and Litecoin all run on proof-of-work blockchains. For such a blockchain to function, computers around the world race to solve mathematical problems in order to process blocks on the network and process transactions. 

Proof-of-work requires miners, which are typically large, industrial operations—especially with Bitcoin, the biggest and oldest cryptocurrency. But some people try to mine the asset alone, with Dogecoin and some other less-valuable cryptocurrencies proving easier to mine than Bitcoin.

As proof-of-work miners are rewarded with digital coins, the SEC said it wanted to clear up whether or not this would constitute dealing with securities.

According to the regulator, as a miner’s “expectation to receive rewards is not derived from any third party’s managerial or entrepreneurial efforts upon which the network’s success depends,” it does not come under the SEC’s jurisdiction. 

“By adding its computational resources to the network, the miner merely is engaging in an administrative or ministerial activity to secure the network, validate transactions and add new blocks, and receive rewards,” the SEC said.

The regulator did not mention any specific coins or networks by name, but Bitcoin and Dogecoin are the two largest proof-of-work coins by total market cap, with both sitting in the top 10 coins by that metric. Ethereum originally ran on a proof-of-work network, but transitioned to a proof-of-stake model in 2022.

The SEC under ex-Chair Gary Gensler hit a number of top American crypto companies with fines for offering staking services, alleging that they were making profit by allowing customers to stake unregistered securities.

Since the election of pro-crypto President Donald Trump, the SEC under its new leadership has said it is trying to make rules clearer for the industry, and has scrapped a number of lawsuits and investigations. 

Edited by Andrew Hayward