Landmark Jury Verdict Finds Digital-Asset Products Linked to Cryptocurrency Mining Are Not Securities

On November 2, a Connecticut jury found that a series of digital-asset products linked to a cryptocurrency mining operation did not count as securities. The landmark jury verdict is among the first to decide whether cryptocurrency assets and products may count as securities.

The case presented the novel issue of whether the digital assets of GAW Miners LLC, a virtual mining company, were considered investment contracts. The company originally sold physical mining equipment but began to offer a series of digital assets to customers. These assets included “hashlets,” or portions of the supposed computing power the company owned, “Hashpoints,” which could be converted into GAW’s “Paycoin” currency, and “Hashtakers” for storing Paycoin. 

In a class-action suit, customers stated that these digital assets were unregistered securities being sold to defraud customers because GAW did not have the physical equipment they purported to sell. Ultimately, the jury found that the products were not unregistered securities, despite contrary findings by the SEC in a related action.

This article further details the case.

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About Winston’s Videogame, Gaming & Esports Group
Recognizing that emerging industries require bespoke lawyering,David Enzminger formed and lead Winston’s Videogame, Gaming & Esports Group to provide comprehensive legal solutions to companies in these industries. This multidisciplinary group includes more than 60 lawyers across 10 practices working seamlessly to assist companies in these industries in all areas, including managing IP portfolios, assisting esports companies to establish global sports leagues, selling franchises, and developing proactive legal solutions for issues that arise from league operations. We represent videogame publishers in antitrust matters and represent both rights owners and gaming companies in licensing issues for game content. In addition, our team helps electronic game clients prepare for all types of regulatory and public scrutiny issues, such as corporate governance, data privacy, and harassment/discrimination claims that are sure to come as the industry continues to grow in both size and influence. Our offices in New York, Silicon Valley, Los Angeles, Shanghai, and Hong Kong provide gaming clients with a global platform for their complex and evolving legal needs.