The U.S. Securities and Exchange Commission (SEC) has issued yet another non-binding interpretation regarding cryptocurrency mining, but instead of offering regulatory certainty, it has drawn harsh criticism from Commissioner Caroline A. Crenshaw.
The statement, released by SEC staff under the Acting Chairman’s office, attempts to clarify whether Proof-of-Work (PoW) mining qualifies as a security under U.S. law. However, Crenshaw argues that it fails to provide clarity and instead relies on circular reasoning.
“These supposedly ‘clarifying’ statements deliver neither progress nor clarity.” — SEC Commissioner Caroline Crenshaw
Flawed Assumptions in the SEC’s Reasoning
The SEC’s statement claims that crypto mining does not constitute a security because miners participate for block rewards, not for profit from third-party efforts. As a result, it argues that mining does not meet the Howey Test, the legal standard for defining investment contracts as securities.
Crenshaw strongly disagrees, pointing out the circular nature of this logic:
“If you start with an assumption that mining is not undertaken with the expectation of profits based on the efforts of others, you will necessarily conclude that it does not involve such an expectation and is therefore not a security.”
Additionally, the statement limits its scope, applying only to general PoW mining, but excluding certain PoW variations and specific protocols—a distinction Crenshaw finds legally inconsistent.
“So, this non-binding statement generally applies to mining. Except when it doesn’t.”
A Potential Loophole for Crypto Miners?
While the SEC stresses that each case still requires a Howey Test analysis, Crenshaw warns that the ambiguity of the statement might lead to misinterpretation as a blanket exemption.
She draws a parallel with a previous SEC staff statement on meme coins, which was widely misreported as excluding meme coins from securities laws despite footnote disclaimers.
“Beware of any headlines that herald a wholesale exemption for mining. And mine the fine print.”
SEC’s Meme Coin Guidance Faces Similar Backlash
Crenshaw also criticizes the SEC’s recent meme coin regulatory guidance, arguing that it is poorly defined and raises more questions than answers.
The SEC previously excluded meme coins from securities regulations, asserting that they exist primarily for cultural and entertainment purposes rather than investment. Crenshaw, however, dismisses this rationale as legally unsound:
“The reality is that meme coins, like any financial product, are issued to make money. Promoters profit by selling the coin and often holding a significant portion of the supply.”
She highlights manipulative practices such as:
- Token burn strategies to artificially increase scarcity
- Pump-and-dump schemes to inflate value
- Exchange listing promises to create market demand
Crenshaw insists that the SEC’s approach undermines the Howey Test, which evaluates whether a reasonable expectation of profits exists based on managerial efforts.
What’s Next for Crypto Regulation?
With the SEC issuing at least ten such non-binding statements in the past two months, the lack of a clear regulatory framework is creating confusion. Crenshaw warns that this approach risks projecting an illusion of legal certainty while failing to address real-world enforcement challenges.
“Rather than an open and transparent regulatory process, we’re getting shadows of legal clarity.”
As debates over crypto mining, meme coins, and securities classifications continue, the SEC’s next steps could have significant implications for investors, miners, and crypto firms alike.