Biden

Wednesday

Bitcoin

Security

<h2 id="what-is-the-sec-alleging-against-vbit">What Is the SEC Alleging Against VBit?</h2> The US Securities and Exchange Commission has taken the position that certain Bitcoin mining hosting services can qualify as securities, according to a lawsuit filed Wednesday against mining firm VBit and its founder, Danh Vo. The complaint, lodged in Delaware federal court, accuses the company of fraud and of misusing roughly $48 million raised from investors between 2018 and 2022. At the center of the case are VBit’s so-called Hosting Agreements. The SEC argues these contracts meet the legal standard for securities under the Howey test, which looks at whether investors commit money to a common enterprise with an <a href="https://financefeeds.com/sec-torn-over-crypto-mining-non-binding-and-muddled-interpretation/" rel="noopener noreferrer nofollow">expectation of profit</a> based on the efforts of others. “VBit’s Hosting Agreements are investment contracts and therefore securities,” the SEC wrote in its filing. The agency added that buyers “did so with the expectation of <a href="https://financefeeds.com/how-to-use-your-crypto-to-make-3200-a-day-on-dot-miners/" rel="noopener noreferrer nofollow">earning passive income</a> and relied exclusively on VBit’s efforts to earn a profit,” noting that investors neither controlled nor operated the mining rigs they believed they owned. According to the complaint, VBit sold more hosting agreements than it had mining machines available, leaving many customers without the computing power they were promised. 
<h3 id="investor-takeaway">Investor Takeaway</h3>
<div>
 The SEC’s case hinges on how VBit structured its hosting contracts. The outcome may hinge less on mining itself and more on investor control, disclosure, and profit expectations.
</div>
<h2 id="why-does-the-sec-say-these-hosting-deals-look-like-securities">Why Does the SEC Say These Hosting Deals Look Like Securities?</h2> The regulator argues that VBit’s model tied investor outcomes together in a way that fits securities law. In the lawsuit, the SEC says VBit directed customers’ computing power into a mining pool it controlled, rather than letting each client independently manage their equipment. “The fortunes of each investor were purportedly tied to the fortunes of other investors,” the SEC wrote, adding that returns depended on the performance of VBit’s overall mining pool and on the company’s ability to attract more participants. This pooling of hashrate, according to the agency, created a shared profit structure that left investors dependent on VBit’s operational choices. The SEC also claims VBit kept full control over mining operations, while customers lacked visibility into where their rigs were located or how they were being used. That framing echoes enforcement tactics used more frequently during the Biden administration, when the SEC often applied securities laws broadly across crypto-related business models. While the current administration has dropped several high-profile crypto probes, fraud-based cases such as VBit’s remain active. 
<h2 id="does-this-apply-to-the-broader-hosted-mining-industry">Does This Apply to the Broader Hosted Mining Industry?</h2> Industry participants have pushed back sharply against the SEC’s interpretation, arguing that VBit’s setup does not reflect how legitimate hosted <a href="https://financefeeds.com/understanding-bitcoin-mining-the-principle-of-the-work-and-the-significance-of-the-problem/" rel="noopener noreferrer nofollow">Bitcoin mining works</a>. Mitchell Askew, head of Blockware Intelligence, said the agency’s theory rests on practices that most hosting providers avoid. “Hosted Bitcoin mining simply means a client purchases a computer and electricity,” Askew told Cointelegraph. “There’s no pooling of capital, no profit-sharing, and no reliance on a promoter to generate returns. Under the Howey test, that is very clearly not a security.” Askew also disputed the idea that the lawsuit creates risk for compliant operators. “I don’t think this affects the hosted mining industry at all. Legitimate hosted mining has no resemblance to an investment contract, and this theory has no legs to stand on,” he said. In traditional hosted mining arrangements, customers usually retain ownership of their machines, choose which mining pool to join, and receive payouts directly from the network. The provider supplies space, power, and maintenance rather than acting as a profit manager. 
<h3 id="investor-takeaway">Investor Takeaway</h3>
<div>
 The SEC’s argument focuses on control and pooling. Hosted mining models that give customers direct ownership and payout control may sit outside this interpretation.
</div>
<h2 id="how-does-this-fit-into-the-sec-s-broader-crypto-stance">How Does This Fit Into the SEC’s Broader Crypto Stance?</h2> The VBit lawsuit stands out as one of the more aggressive classifications made by the SEC since the change in administration. Under President Trump, the agency has adopted a more accommodating tone toward <a href="https://financefeeds.com/crypto-market-growth-adoption-rates-by-country/" rel="noopener noreferrer nofollow">crypto markets</a>, while still pursuing cases tied to alleged deception or misuse of funds. Several enforcement actions launched during the previous administration have been dropped or narrowed, yet the SEC continues to pursue cases it views as clear-cut fraud. The VBit complaint falls into that category, according to the agency, which alleges the company misrepresented its mining capacity and investor arrangements. The SEC did not respond to a request for comment on whether the lawsuit reflects a broader policy view on mining hosting services. For now, the case places a spotlight on how <a href="https://financefeeds.com/crypto-etfs-record-934m-in-daily-inflows-as-investor-demand-surges/" rel="noopener noreferrer nofollow">Bitcoin mining products are marketed to investors</a>. If courts accept the SEC’s reasoning, hosting providers may face closer scrutiny when contracts blur the line between infrastructure services and profit-oriented offerings. If the agency’s view is rejected, the decision could limit how far securities law reaches into mining operations.

SEC Claims Bitcoin Mining Hosting Can Be a Security in New Lawsuit

Table of Contents

FinanceFeeds

Other articles published on Dec 19, 2025

Join our free newsletter for daily crypto updates!