SEC Says Hosted Bitcoin Miners Could Trigger Securities Laws
The SEC filed a lawsuit against Bitcoin mining company VBit and its founder, Danh Vo, alleging fraud and misappropriation of $48 million by selling more Bitcoin mining hosting agreements than available rigs from 2018 to 2022. The SEC argues these hosting agreements are securities under the Howey test, as investors expected passive income based solely on VBit’s efforts and lacked control over their mining rigs. The agency highlighted that VBit operated its own mining pool and fully controlled the mining process, tying investor profits to the performance of the collective pool. Industry experts argue this case is not representative of standard hosted Bitcoin mining, which typically involves clients purchasing equipment and power without profit-sharing or pooling capital, and thus does not meet the Howey standard for securities. The SEC’s position contrasts with industry norms and faces opposition from sector leaders, who claim legitimate hosted mining arrangements do not constitute securities. Despite this, the SEC continues enforcement against crypto-related fraud, with several ongoing lawsuits in the industry.
