The US Securities and Exchange Commission has raised fresh concerns around hosted Bitcoin mining, signaling in a new lawsuit that certain third-party mining hosting services could fall under US securities laws. While regulators argue this model can resemble an investment contract, industry leaders say the ruling targets a specific case and should not impact legitimate Bitcoin mining hosting providers.
SEC Lawsuit Targets VBit and Hosted Mining Model
In a lawsuit filed in a Delaware federal court, the SEC accused Bitcoin mining company VBit and its founder, Danh Vo, of fraud and misappropriating roughly $48 million from investors between 2018 and 2022. According to the complaint, VBit allegedly sold more mining hosting agreements than the number of physical mining rigs it actually operated.
The regulator claims that VBit’s hosted Bitcoin mining agreements qualify as securities under the Howey test, the legal framework used to determine whether an arrangement constitutes an investment contract.
The SEC argued that investors entered the hosting agreements expecting passive income and relied entirely on VBit’s operational efforts to generate profits. Investors allegedly had no control, access, or oversight over the mining rigs they believed they owned, reinforcing the SEC’s position that the agreements met the criteria of a securities offering.
How the SEC Applied the Howey Test to Bitcoin Mining
According to the SEC filing, VBit maintained full control over the mining infrastructure and operations, preventing investors from independently verifying or managing their equipment. The agency also highlighted that VBit directed all hashrate into a mining pool under its own control.
The SEC stated that investor profits were tied directly to the performance of the broader VBit mining pool, meaning each participant’s returns depended on the collective success of the operation rather than individual mining output. This pooling structure was central to the SEC’s classification of the hosted Bitcoin mining agreements as securities.
Regulators emphasized that as more investors were added to the pool, the perceived profit potential increased, further aligning the arrangement with traditional investment contracts.
Industry Pushback on SEC’s Bitcoin Mining Classification
Despite the SEC’s claims, industry executives argue that the lawsuit reflects an outlier rather than a shift in regulatory treatment of Bitcoin mining hosting services.
Mitchell Askew, head of Blockware Intelligence, told that pooling hashrate and controlling investor equipment is not standard practice in the hosted Bitcoin mining industry. He explained that legitimate hosting typically involves clients purchasing their own mining hardware and paying for electricity and hosting services, without profit-sharing or reliance on a promoter.
Askew stated that under normal hosted mining models, there is no pooling of investor capital and no expectation of profits generated by a third party’s efforts, making them clearly distinct from securities under the Howey test. He added that properly structured Bitcoin mining hosting has no resemblance to an investment contract and should not be affected by the SEC’s lawsuit.
Regulatory Context and Broader Crypto Implications
The SEC’s position marks one of the more notable crypto-related enforcement actions carried over from the Biden administration’s aggressive regulatory approach. That era saw many cryptocurrency businesses and products broadly categorized under securities laws, drawing criticism from industry participants.
Under the Trump administration, the SEC has taken a more industry-friendly stance, dropping several high-profile crypto investigations initiated in previous years. However, fraud-related lawsuits, including the case against VBit, continue to move forward.
At the time of publication, the SEC had not responded to requests for comment. While the lawsuit has reignited debate around Bitcoin mining regulation, industry experts maintain that compliant and transparent hosted mining services remain on solid legal ground.
