The Attorney General of South Carolina has issued a cease-and-desist order against the cloud mining companies Genesis and Swiss Gold Global Inc. The order asserts that the mining contracts offered by these companies are to be classified as securities. According to the South Carolina Securities Commission, Swiss Gold Global acted as a broker-dealer for Genesis but failed to register as such in the state to offer securities.
The contracts in question allow buyers to purchase computing power for a specified duration, which is hosted and operated by the cloud mining provider. From the Commission’s perspective, these contracts are considered “investment contracts,” and therefore qualify as securities under South Carolina state law.
We anticipate that other regulatory bodies may adopt South Carolina’s stance and categorize cloud mining contracts as securities. This would mean that cloud mining service providers would need approval from regulators like the SEC, FCA, or BaFin to offer such contracts to investors. Currently, cloud mining contracts are often marketed through MLM systems or financial service companies, and many buyers of these contracts remain unaware of how their funds are being utilized. Given the history of scams and fraudulent schemes in this sector, such regulation is both necessary and welcome.