SEC Drops Investigation of Bitcoin Stacks Developer Hero – File

In the year The U.S. Securities and Exchange Commission has dropped a three-year investigation into Bitcoin Stakes, the Layer 2 blockchain developer that raised $70 million from token sales between 2017 and 2019, according to a July 12 regulatory filing.

Hiro, formerly known as Blockstack, has been treating its native token STX as a security under US law since its launch in 2018.

“Based on the information we have as of this date, we do not intend to recommend the Commission's enforcement action against HeroSystems PBC, formerly known as Blockstack PBC,” the regulator's letter included in Friday's filing said.

Since at least 2019, the developer has regularly filed with the securities regulator under Regulation A+, which is exempt from registration for smaller issues of securities. It also raised some funds under the widely used regulations D and S for private and international offerings respectively.

However, in 2021, Hiro argued that the Stacks blockchain was decentralized enough that the company never qualified as a guarantor. “Management further concluded that if Hiro is not in a position to provide and is unable to provide necessary management services to Stacks Blockchain, then it is not necessary for Hiro to treat Stack Tokens as investment contracts. They are securities under federal securities laws,” the company said in its filing.

It's the second crypto-related probe the US regulator has dropped this week. On July 11, Paxos announced that the SEC has decided not to take enforcement action against the Web3 infrastructure platform in connection with its investigation of the Binance USD (BUSD) stablecoin.

Related: SEC Won't Pursue Enforcement Action Against Paxos

The SEC is still pursuing enforcement actions against companies including Ripple, Binance, Kraken and Coinbase. However, a series of recent court decisions – including a landmark Supreme Court ruling in June – have significantly killed the regulators' ability to take a firm stand against alleged violations among crypto issuers.

The Supreme Court's decision in Looper Bright v. Raimondo overturned the Chevron Doctrine, which had previously given regulators like the SEC broad latitude to decide how to enforce existing laws. In 2023 and 2024, respectively, in SEC actions against Ripple and Binance, judges rejected claims that the companies violated securities laws.

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