South Carolina contracts for cloud mining equivalent to securities

The attorney General of South Carolina issued a restraining order against the company Genesis Mining. According to the documents, he equated contracts for cloud mining offered by the company to the securities.

Contracts for cloud mining allows people to purchase hashing power for mining cryptocurrency. Genesis Mining is one of the most reputable operators in the industry providing similar services. The company operates a data center in Iceland Reykjavik. In the application
March 9 the Office of the attorney General of South Carolina ordered Genesis Mining and Swiss Gold Global to cease to provide services to residents of the state.

The document, compiled by the office of the attorney General, said:

«Genesis Mining offers mining contracts for six of cryptocurrency: bitcoin, Dash, ether, litecoin, Monero and zcash for, each of which gives the investor the right to their production in exchange for investing in a mining contract. Defendant Genesis Mining is engaged in computing on behalf of investors.»

The reason why the attorney General has issued a ban, becomes apparent. According to the document: «Genesis Mining is continuously offered investment opportunities within the mining contracts to residents of South Carolina through its website».

It seems that Swiss Gold Global has sold the contracts on behalf of Genesis, but was not registered as a broker in South Carolina. In the application it is stated that such actions are illegal, as «investment contracts constitute securities, and the investment contract includes investments in a common enterprise with the expectation of profit».

Most likely, the Genesis will focus in other places because the loss of one US state is immaterial for the company. But if other States will follow the example of South Carolina, it could mean the beginning of the end of contracts for cloud mining in the United States.

For mining companies, do not wish to register with the SEC, the most reasonable approach may be to do not offer services to U.S. investors. Moonlite, a project to raise capital to build data centers in Iceland, have already occupied a similar position — U.S. investors can’t participate in the ICO.

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