The SEC Has Dropped a Three-Year Investigation Into Hiro Systems, the Developer of Bitcoin's Stacks Layer-2 Blockchain

This is the second crypto-related investigation the US regulator has dropped this week. On July 11, Paxos announced that the SEC decided against taking enforcement action against the Web3 infrastructure platform in connection with its investigation of the Binance USD (BUSD) stablecoin.

The United States Securities and Exchange Commission has dropped a three-year investigation into Hiro Systems, the developer of Bitcoin's Stacks layer-2 blockchain, which raised $70 million from token sales between 2017 and 2019, according to a July 12 regulatory filing.

Hiro, which was previously called 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 an enforcement action by the Commission against Hiro Systems PBC, formerly known as Blockstack PBC,” according to a letter from the regulator included in the Friday filing.

Since at least 2019, the developer has regularly filed with the securities regulator under Regulation A+, a registration exemption for smaller securities issuances. It also raised some funds under the widely used Regulation D and S exemptions for private and international offerings, respectively.

However, in 2021, Hiro argued that the Stacks blockchain had become so sufficiently decentralized that the company no longer qualified as a securities issuer. “Management concluded further that if Hiro is no longer in the position of providing, and will no longer be able to provide, essential managerial services to the Stacks Blockchain, then it is no longer necessary for Hiro to treat the Stacks Tokens as investment contracts that are securities under the federal securities laws,” the company said in a filing with the SEC at the time.

This is the second crypto-related investigation that the US regulator has dropped this week. On July 11, Paxos announced that the SEC decided against taking enforcement action against the Web3 infrastructure platform in connection with its investigation of the Binance USD (BUSD) stablecoin.

The SEC is still pursuing enforcement actions against firms, including Ripple, Binance, Kraken and Coinbase. However, a series of recent court rulings — including a landmark Supreme Court ruling in June — have significantly curtailed the regulators’ ability to take a hardline stance against alleged violations among crypto issuers.

The Supreme Court’s Loper Bright v. Raimondo decision overruled the so-called Chevron Doctrine, which previously provided regulators, such as the SEC, with broad latitude in determining how to enforce existing laws. The SEC also experienced setbacks in actions against Ripple and Binance in 2023 and 2024, respectively, when judges ruled against claims that the companies had violated securities laws.