The SEC’s Evolving Approach to Programmatic Token Distributions and DePIN Networks

The regulatory landscape for digital assets continues to shift as the Securities and Exchange Commission (“SEC”) refines its approach to token distributions, decentralized networks, and the application of federal securities laws to blockchain-based ecosystems. While courts and regulators have long relied on established securities-law principles, recent developments, including a significant no-action letter issued on September 29, 2025, indicate a growing willingness to distinguish utility-driven programmatic token flows from traditional capital-raising transactions.

As the SEC under the Trump administration adopts a more flexible posture toward digital assets, understanding the agency’s treatment of programmatic token distributions, particularly those used in decentralized physical infrastructure networks (“DePIN”), is increasingly important for founders, ecosystem contributors, and compliance teams.

This blog provides an overview of the SEC’s latest actions, examines how programmatic token mechanics interact with securities-law concepts, and offers practical considerations for blockchain projects navigating this evolving environment.

The SEC’s 2025 DePIN No-Action Letter 

On September 29, 2025, the SEC’s Division of Corporation Finance issued a no-action letter stating that it would not recommend enforcement under Section 5 of the Securities Act of 1933, nor require registration under Section 12(g) of the Securities Exchange Act of 1934, for a DePIN foundation’s programmatic token distributions, provided they occur in the manner described in the foundation’s submission.

The request letter describes a decentralized network operated entirely through smart contracts, without a central promoter or operator. The network relies on three core token flows:

• User Payments, which are fees paid by market participants who use the network.
• Provider Payments, which are automatic distributions of User Payments to connectivity providers who supply physical infrastructure.
• Computation Payments, which are emissions of new tokens awarded to resource providers conducting protocol-level computations.

According to the request, these flows are fully algorithmic, nondiscretionary, and measured directly by participant contribution. The SEC staff did not provide independent legal reasoning, instead basing its no-action position solely on the facts and analysis presented by the requestor. The requestor argued that these programmatic distributions do not satisfy the “efforts of others” component of an investment-contract analysis because token recipients earn rewards based on their own operational output rather than on managerial or entrepreneurial actions of a sponsor.

The SEC staff emphasized that its position may differ if any facts or circumstances change, underscoring the highly fact-specific nature of crypto no-action relief.

Key Considerations Behind the SEC’s Non-Enforcement Position 

The foundation’s submission identifies several characteristics that shaped the SEC staff’s comfort with the programmatic distribution model and its conclusion that the token flows did not resemble securities transactions.

Utility-First Economic Reality 

The tokens serve functional purposes within the network, including paying for bandwidth, rewarding infrastructure providers, and enabling computational tasks. They were not designed to raise capital, attract investors, or promise passive returns.

Absence of Managerial or Entrepreneurial Efforts 

The foundation’s role was limited to ministerial and ancillary activities, including education and stakeholder coordination. It did not direct the network’s operation or exercise discretion over token distribution, which occurred automatically based on measurable participant activity.

Deterministic, Code-Based Reward Mechanics 

All payments were governed by smart-contract rules. No human actor, including the foundation, retained authority to adjust terms, select winners, or determine reward levels.

Active, Non-Passive Participants 

Token recipients were required to build, maintain, and operate physical infrastructure or perform computational tasks. Their rewards depended entirely on their own sustained efforts, similar to miners in a Proof-of-Work system.

Limited Marketing and No Profit-Oriented Messaging 

The foundation’s communications emphasized the token’s role in facilitating network use, rather than as an investment vehicle or income-producing asset.

These factors collectively framed the token distributions as earned compensation for real-world services, not as investment opportunities reliant on the managerial efforts of a promoter.

The Broader Regulatory Context: A Shift Under the current Administration 

The DePIN no-action letter did not emerge in isolation. Since 2025, the SEC, influenced by shifting leadership and policy priorities, has signaled a more constructive and engagement-oriented approach to blockchain technologies.

Recent trends include reduced enforcement activity against crypto firms, the withdrawal of several high-profile lawsuits involving token issuances, public statements by Chair Atkins and Commissioner Peirce supporting clearer pathways for compliant utility-driven token ecosystems, and plans for a more comprehensive crypto regulatory framework, although formal rulemaking has not yet materialized.

In public comments and administrative actions, SEC leadership has acknowledged that not all tokens should be treated as securities, particularly where tokens reward labor, infrastructure provision, or protocol-level contributions rather than investment of capital.

The DePIN no-action letter, the first digital-asset no-action relief issued since 2020, illustrates this refined regulatory approach and suggests an openness to distinguishing programmatic reward systems from capital-raising token sales.

Practical Implications for Token Foundations and Web3 Infrastructure Projects

The 2025 no-action letter provides several takeaways for developers designing token ecosystems.

Programmatic Incentives and Fundraising Are Not the Same

Contribution-based token rewards that compensate service providers may fall outside traditional securities-law risks if they do not involve speculative marketing, capital raising, or reliance on managerial discretion.

Governance and Discretion Are Critical

Foundations, decentralized autonomous organizations (DAOs), or ecosystem entities should minimize discretionary control over token allocations, emissions, and reward parameters to reduce the appearance of central managerial efforts.

Marketing Should Emphasize Functionality

White papers, websites, and public statements must avoid implying investment returns, price appreciation, or managerial-driven value creation.

Secondary Markets Present Independent Regulatory Considerations

Even if programmatic distributions are not securities transactions, secondary trading may still implicate obligations under the Exchange Act, including broker-dealer rules and platform-level compliance.

Outcomes Are Fact-Driven

No-action relief is inherently narrow. Deviations from the facts presented in the request, including changes to emissions schedules, governance structures, or promotional practices, may materially alter the SEC’s assessment.

Final Thought 

The SEC’s 2025 DePIN no-action letter represents an important development in token regulation, particularly for decentralized networks that rely on earned, utility-based token rewards rather than capital-raising issuances. When viewed in the context of the broader policy signals from the Trump-era SEC, the no-action letter highlights an emerging regulatory distinction between programmatic, labor-based token distributions and investment-oriented offerings.

Despite these signals, securities-law analysis remains highly fact-dependent, and enforcement priorities may evolve. Token foundations, developers, and ecosystem participants should carefully evaluate distribution mechanics, governance structures, and public communications at every stage of project development.

If you have questions about whether a token model or distribution structure may trigger securities-law obligations, or how the SEC’s evolving posture may affect your project, our team is ready to assist.

Authors: Nick L. Torres, Esq. and Weiwei Lu

Contact Person: Nick L. Torres, Esq. and Zhiqi Zheng, Esq.