On September 29, 2025, the Division of Corporate Finance (the “Staff”) of the SEC granted a no-action exemption to DoubleZero from the registration requirements of Section 5 of the Securities Act of 1933 (the “Securities Act”) and Section 12(g) of the Securities Exchange Act of 1934 (the “Exchange Act”) with respect to Program Transfers (as defined below) of the original 2Z symbol (“2Z”).[1] The response adds to the short line of Section 5 and Section 12(g) given to issuers of digital assets, including IMVU,[2] pockets of quarters,[3] And Turnkey Jet.[4]
What is Double Zero?
The DoubleZero Foundation (“DoubleZero” or the “Foundation”) is a non-member incorporation company in the Cayman Islands established to support the development, decentralization, security and adoption of the DoubleZero Network – a purpose-built internet network optimized for distributed systems, such as blockchain.[5] DoubleZero recently introduced a decentralized physical infrastructure network (“DePIN”) to enable a centralized market for untapped private fiber connections (“the Protocol”). The protocol aims to improve consensus speed by taking advantage of the spare fiber capacity of private market participants. Market participants can contribute, and thus monetize, unused fiber capacity, and the protocol connects fibers together to form a single mesh network, which DoubleZero claims allows for faster and more efficient communications (“the mesh”). Blockchain validators and other participants (“Users”) can then pay the network a fee to use the high-speed network as an alternative to slower, traditional Internet channels.
The network is operated, managed and developed through a widespread network of participants:
- Network providersWhich contributes to untapped fibers;
- Resource providerswhich performs various maintenance and monitoring duties necessary to maintain the technical integrity and ongoing functionality of the network;
- Userswho pay 2Z to access the high-speed network; and
- Foundationwhich educates the public, coordinates communications between various stakeholders, and supports decentralization and development of the protocol and network.
DoubleZero plans to distribute 2Z tokens to network participants in two ways (collectively, “automated transfers”):
- Provider PaymentsAs compensation to network providers for contributing their fiber capacity;[6] and
- Account paymentsTo compensate resource providers for calculating provider payment amounts, maintaining the DoubleZero ledger, and facilitating network administration.
2Z also acts as a currency through which users make payments to access the network.[7]
Request for no-action relief
In connection with the launch of the Protocol, DoubleZero has requested confirmation that staff will not recommend enforcement actions if programmatic transfers are made without registration under Section 5 of the Securities Act and if 2Z is not registered as a class of securities under Section 12(g) of the Exchange Act. DoubleZero argued that under Amateurthe expectation of profits is not derived from the entrepreneurial or managerial efforts of the promoter or sponsor, but rather from the efforts of the network providers and resource providers themselves, and therefore, one of the indicators of the investment contract is absent, which means that there is no investment contract that requires registration.
Amateur analysis
Courts apply Amateur A test to determine the existence of an investment contract, and thus a security, under the federal securities laws. the Amateur The test examines whether there is (1) an investment of funds, (2) in a joint venture, (3) with a reasonable expectation of profits, and (4) derived from the entrepreneurial or managerial efforts of others.[8] If any element is not met, then there is no investment contract under it Amateur Therefore, there is no security under the federal securities laws.
DoubleZero’s argument focused on the fourth element. In assessing whether the prospect of profits depends on the entrepreneurial or managerial efforts of others, courts will consider whether the failure or success of the venture depends on the “undeniably significant” managerial efforts of others—usually the issuers or promoters of the securities.[9] When the success of the project depends on the efforts of the security holders themselves, there is no investment contract.[10] When enterprises involve the efforts of multiple participants, courts will determine whose efforts constitute the “fundamental administrative conduct of the enterprise,” and who represent the “critical determinants of the activity.” [its] success.”[11] In digital asset transactions, courts often look to “the economic reality surrounding the offer and sale” and whether doing so would result in buyers having a reasonable expectation of profits.[12]
Here, DoubleZero said that any projection of profits from automated transfers is based on the efforts of network providers and resource providers, and not the efforts of the organization or any other third party. Network providers must spend significant time, effort and technical expertise to participate in the network, and once connected, ongoing maintenance and attention are required to ensure satisfactory fiber performance and continued eligibility for rewards. DoubleZero stressed that this is not just “plug and play,” and that network providers are not passive investors in this endeavor. Rather, the performance of network providers is the “critical determinant” of the success of the protocol and network. Likewise, resource providers engage in activities to secure the network, validate transactions in the DoubleZero ledger, verify network providers’ link performance, and calculate payment distributions, among other tasks necessary for the network to function. In doing so, DoubleZero sees that the resource providers themselves, not the organization, are the ones monitoring and maintaining the network. Although the Foundation works to support the protocol and the network, including by making grants, communicating with policy makers, and assisting network providers with setup, these activities are primarily ancillary to the day-to-day services provided by network providers and resource providers. Accordingly, DoubleZero emphasized that the efforts of network providers and resource providers constitute the “undeniably important” management efforts that determine the success of the network.
Furthermore, DoubleZero said that there is no forecast of profits generated by the organization. Network providers and resource providers engage with the network to receive compensation for their own services, not profits derived from the efforts of the organization or any third party. DoubleZero’s public and marketing communications regarding 2Z “have been and always will be” educational and factual, and focus on technical explanations and the utility of the token. As such, DoubleZero has confirmed that its marketing activities do not reasonably give rise to any expectation of negative earnings.
DoubleZero also argued that the potential secondary market for 2Z does not change the analysis. Specifically, DoubleZero highlighted the consumer nature of potential secondary acquisitions and again noted that the enterprise’s marketing is focused on the benefit of 2Z, rather than the potential for appreciation or economic gain.[13]
Ultimately, the staff responded that it would not recommend enforcement action if program transfers were made without registration under Section 5 of the Securities Act and if 2Zs were not registered as a class of securities under Section 12(g) of the Exchange Act.
Considerations for market participants
Although the Task Force’s response is non-binding, is limited to the facts presented, and does not provide any legal analysis, the relief may have notable implications for DePIN and decentralized finance (“Decentralized finance“) Ecosystems.
Economic reality
This mitigation follows recent SEC guidance stating that when token distributions are used as compensation for verifiable action – such as computation or some mining…[14] Or staking activities[15]– There is no offer and sale of securities. Accordingly, the mitigation may reflect greater recognition of the economic reality surrounding many DePIN and DeFi transactions, namely that market participants are incentivized by the potential for compensation for their own services, rather than passive investment potential.
The efforts of others
Relief also provides insight into how the “efforts of others” element may appear. Amateur It can be evaluated by employees in DePIN and DeFi contexts. DoubleZero’s order highlights the distinction between passive investment schemes and the DePIN and DeFi ecosystems where market participants are actively and directly involved in operating or maintaining the network. Moreover, even when an organization or third party provides certain support services, from the employees’ perspective, these efforts alone may not be satisfactory. AmateurThe “efforts of others” condition.
Reasonable expectation of profits
Finally, the mitigation is consistent with the courts’ and the SEC’s prior emphasis on marketing materials in assessing buyers’ reasonable expectations. When marketing focuses solely on the utility of the token and its consumer use – rather than the potential for profit – the SEC or courts are likely to find that there is no reasonable expectation of profits under the token. Amateur.
[1] Corporate Finance Department Response: DoubleZero (September 29, 2025).
[2] Corporate Finance Department Response: IMVU, Inc. (November 19, 2020).
[3] Corporate Finance Department Response: Pocketful of Quarters, Inc. (July 25, 2019).
[4] Corporate Finance Department Response: TurnKey Jet, Inc. (April 3, 2019).
[5] Incoming No Action Message: DoubleZero (September 25, 2025).
[6] Provider payments will be deferred to ensure adequate fiber quality.
[7] 2Z will also be used in the signing mechanisms that secure the protocol. To act as a resource provider, a person must hold a stake in 2Z or delegate a stake in 2Z to other holders of 2Z.
[8] SEC v. WJ Howey Company328 U.S. 293 (1946).
[9] SEC v. Glenn W. Turner enters.474 F.2d 476, 482 (9th Cir. 1973).
[10] See, for example, Williamson v. Tucker645 F.2d 404, 419 (1981).
[11] Securities and Exchange Commission v. Koscot Interplanetary, Inc., 497 F.2d 473, 485 (5th Cir.1974).
[12] SEC v. Ripple Labs, Inc.682 f. extension. 3d 308, 326 (SDNY 2023) (citing United Housing Corporation v. Foreman421 U.S. 837, 852 (1975).
[13] United Housing Corporation v. Foreman421 U.S. 837, 853 (1975).
[14] Statement regarding certain proof of work mining activities (March 20, 2025).
[15] Statement on some protocol signing activities (May 29, 2025).
