South Carolina Declares Cloud Mining Contracts to Be Securities

South Carolina’s Attorney General slapped Genesis Mining, one of the globe’s biggest cryptocurrency cloud mining firms, with a cease and desist order.

Genesis Ordered To Close Shop

According to South Carolina’s Attorney General, when asked why the cease and desist was filed, Genesis Mining continually provided investment opportunities in Mining Contracts to residents of South Carolina through its site. It seems as if Swiss Gold Global sold the contracts on behalf of Genesis yet wasn’t registered as brokers in South Carolina. The filing claims it’s illegal because investment contracts will constitute securities, and investment contracts include investments in one enterprise with a profit expectation.

The cease-and-desist order mentions a reference to two companies, Swiss Gold Global Inc. and Genesis Mining. It asks both companies to cease all operations inside South Carolina’s borders.
According to the cease-and-desist order, the state considers a mining contract to be a security, which makes it illegal to sell it to residents without the right authorization.

According to the Securities Commission of South Carolina, Swiss Gold Global acted as brokers and sold mining contracts for Genesis, without having to register in South Carolina to provide securities.
According to a statement from cease and desist order, at all times relevant to the order Genesis Mining continually provide opportunities for investing in Mining Contracts to residents in South Carolina through its site. During no time that was relevant to the events stated was Swiss Gold Global registered with the Division as brokers, and Swiss Gold Global claimed no registration exemption.

At present, Genesis Mining provides cloud mining of six cryptocurrencies to its clients: Zcash, Monero, Litecoin, Ethereum, Dash, and Bitcoin. Via the mining contracts, clients lease a specific quantity of computing power for a certain time to mine the cryptocurrency from the list within a cloud-based platform. It provides customers a stress-free method of mine cryptocurrencies without having to maintain any hardware.

But, according to the commission, the agreements between Genesis Mining and its clientele makes up investment contracts and are securities under the law of South Carolina.

The authority banned both companies from conducting business in the state at any period in the future. Now, the companies may appeal for a court hearing against the cease and desist order.

In the meantime, recently, the state authority in New Jersey issued a cease-and-desist order against a blockchain company that was endorsed by Steven Seagal, which also accused the company of selling unregistered securities to residents in New Jersey.

Attorney General Predicts Dark Clouds for Contracts

For mining firms that seek to avoid registering with the SEC, which is more than likely to be most of them, the best approach might be to avoid investors in the U.S. altogether. A project that raises funds to build mining data centers inside Iceland, Moonlite, already took that stance. Investors in the U.S. can’t be involved in its token sale. Mining companies that seek investment, be it via tokenization or cloud contracts, might discover their best bet includes omitting the United States altogether.