In a regulatory decision with potential implications for decentralized networks, the U.S. Securities and Exchange Commission (SEC) issued a no-action letter on September 29, 2025, concerning DoubleZero’s 2Z token. The token is used to reward participants in a decentralized physical infrastructure network (DePIN). The SEC confirmed it would not recommend enforcement action if DoubleZero proceeds with the token distribution model outlined in its legal submission. This decision marks the first time the SEC has publicly allowed a DePIN token to operate outside securities law. It also adds clarity on how function-based token rewards may differ from traditional investment offerings.
DePIN Tokens Not Treated as Securities Under SEC Review
DoubleZero’s DePIN model enables participants to contribute real-world services, such as network connectivity and computational work, in return for tokens. The project operates without a centralized management structure and distributes tokens programmatically, based on network rules.
According to DoubleZero’s legal filing on September 25, the 2Z token is issued in two specific ways: first, as compensation for Network Providers who deliver connectivity, and second, to Resource Providers who compute payment calculations for those services.
Because these token distributions are tied directly to user activity, and not to passive investment or speculation, the SEC determined that the 2Z token does not meet the definition of a security. Therefore, the agency stated it would not require DoubleZero to register the token under the Securities Act or the Securities Exchange Act.
Howey Test Not Satisfied Under This Distribution Model
The SEC’s determination centers on the application of the Howey Test, a legal framework used to decide whether an asset is an investment contract. The test evaluates whether an individual invests money in a common enterprise, expecting profits primarily from the efforts of others.
In DoubleZero’s case, the SEC accepted that the 2Z token is distributed only as compensation for services provided, rather than offered as an investment opportunity. The project does not seek capital from investors but instead uses tokens to reward network activity. Since token recipients must actively contribute by running nodes or performing calculations, there is no reliance on others’ efforts for financial gain. As a result, the Howey Test is not satisfied.
Tokens Function as Operational Incentives, Not Financial Instruments
The 2Z token was designed as a tool to facilitate network growth through peer-based contributions, not as a speculative asset. DoubleZero’s model does not involve public offerings or token sales aimed at raising funds for development. Instead, token distribution is automated and tied to objective network tasks. These characteristics, according to the SEC’s no-action letter, place the token outside traditional securities classifications.
The agency noted that DoubleZero’s use of “Programmatic Transfers”, meaning tokens are issued through a predefined algorithm that removes the element of managerial discretion. Each participant earns tokens by completing measurable activities, and there is no guarantee or promise of future profit.
Commissioner Peirce Emphasizes the Limits of SEC Authority
Following the no-action letter, Commissioner Hester M. Peirce released a formal statement addressing the regulatory approach to decentralized infrastructure models. She stated that the SEC’s mandate from Congress is to regulate securities markets and not all forms of economic coordination. In her view, DePIN networks organize contributors to build physical services using token-based rewards that do not resemble securities in form or function.
She further clarified that DePIN projects like DoubleZero operate without the centralized corporate structures typically found in capital-raising schemes. Since tokens in these systems are earned through services rendered, and not held in expectation of passive profits, treating them as securities would extend the SEC’s jurisdiction beyond its legal authority.
Distinction Between DePIN Incentives and Traditional Fundraising
The SEC’s letter reflects a key distinction between token-based rewards for network activity and investments intended to fund a company’s operations. In DoubleZero’s model, participants receive tokens only after performing specific tasks under network rules. There are no investors contributing funds in exchange for future profits managed by a centralized team.
DoubleZero’s legal team emphasized this point by stating that the 2Z token has no ownership rights, equity features, or contractual profit mechanisms. The project’s design avoids offering tokens to the public for speculative purposes. The SEC confirmed that, under these circumstances, the tokens are not subject to registration under either federal securities law.
Programmatic Transfers Operate Without Centralized Discretion
The system DoubleZero uses to issue 2Z tokens is entirely programmatic and does not rely on human discretion. This approach ensures that token rewards are tied to actual output, rather than promised outcomes. Since there is no entity managing token distribution based on subjective decisions, there is no issuer-beneficiary relationship akin to securities distribution.
The network’s automated reward model plays a critical role in separating DePIN tokens from financial instruments that fall under SEC jurisdiction. Because the tokens are distributed based on performance and computation, and not via promotional campaigns or speculative sales, they remain outside the enforcement scope, according to the no-action letter.
Legal Foundation Rests on Functional Design, Not Market Valuation
DoubleZero’s legal submission did not base its argument on the market price of the 2Z token or its future potential value. Instead, the legal team focused on the token’s operational role in supporting decentralized infrastructure. The argument maintained that the value participants receive is tied directly to the services they provide.
The SEC accepted this analysis, confirming that economic function, not assumed investor intent determines whether a token qualifies as a security. As such, the agency found that the 2Z token’s use case does not require registration under existing securities laws. The SEC’s no-action letter provides a reference point for other DePIN projects that use tokens to incentivize resource sharing and service delivery.
It confirms that if tokens are issued purely for functional purposes within a network without involving fundraising, speculative promises, or centralized management, they may fall outside federal securities regulations. This decision applies specifically to DoubleZero’s structure and facts. However, it suggests a regulatory pathway for projects using blockchain to coordinate decentralized physical infrastructure, such as bandwidth, energy, or mapping services.
Conclusion: SEC Draws Clear Line Between Activity-Based Tokens and Securities
The SEC’s no-action response to DoubleZero outlines how function-based token incentives can operate lawfully outside the securities framework. The case establishes that when token rewards are tied to service performance, involve no speculative investment, and are governed by automated rules, they do not meet the legal definition of a security.
The decision reflects a fact-based approach grounded in statutory authority. It also indicates that regulators may recognize new economic models, provided those models do not bypass investor protections embedded in securities law.
