On September 29, 2025, the Chief Counsel’s Office of the U.S. Securities and Exchange Commission’s (the “Commission”) Division of Corporation Finance issued a no action letter to the DoubleZero Foundation (the “Foundation”). In the no action letter, the Division agreed that it would not recommend enforcement action against the Foundation in connection with certain Programmatic Transfers (defined below) without registration under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”). In addition, the Division agreed that 2Z tokens offered and sold in such Programmatic Transfers will not require registration as a class of equity securities under Section 12(g) of the Exchange Act, as amended. Issuance of the no action letter is noteworthy as a sign that the Commission staff is open to engagement with crypto market participants on the application of the federal securities laws to their activities.
Background
The Foundation was formed to support creation of the DoubleZero Network (the “Network”), a “purpose-built internet optimized for distributed systems, like blockchains.” In its letter to the Commission (the “Letter”), the Foundation argues that, while software and computing capabilities continue to improve, the hardware supporting networks has stagnated, and blockchain traffic must compete with all other public internet traffic for network capacity. Since large technology companies also compete for network space, many have built their own fiber networks—and many of these networks have existing idle capacity, which, the Foundation believes, can be a source for additional network capacity for the blockchain. Therefore, the DoubleZero Protocol enables creation of a marketplace for this existing underutilized fiber capacity, which is then linked to form the Network. The more the Network grows by adding new participants, such as data center operators, with additional fiber links (“Network Providers”), the faster and more powerful it becomes. Importantly, there is no central promoter or sponsor responsible for operating the Network.
The Foundation and other Network participants launched a new 2Z token, which will be offered and sold as compensation to: (i) Network Providers for providing capacity to the Network (“Provider Payments”), as outlined above,[1] and (ii) Resource Providers for their calculation of Provider Payment amounts (“Computation Payments” and together with Provider Payments, the “Programmatic Transfers”). Specifically, Resource Providers will perform maintenance and monitoring tasks, such as calculating Computation Payments, recording transactions on the “DoubleZero Ledger,” and validating the Ledger, in order to maintain the Network. According to the Letter, “Resource Providers are an unaffiliated and dispersed group of operators running open source software in a non-discretionary manner that operate similarly to network validators in a Proof of Stake network.”
Network users will be able to acquire 2Z tokens on the secondary market and use these to pay Network fees in order to access the Network. In addition, the Foundation plans to maintain a Token Treasury of 2Z Tokens to support the growth of the Network; for example, for community education, technical thought-leadership and advising, or information sharing with regulators and other public sector parties. The Foundation does not believe that 2Z tokens are an investment, will not promote the Network or 2Z as a way for 2Z token holders to earn passive investment returns, and publicizes the view that 2Z is a digital asset for use in connection with the Network, emphasizing its utility. As stated in the Letter, none of the Foundation’s activities “amount to management-level decision making that would impact the success or failure of any enterprise on which Network Providers, Resource Providers, or other 2Z token holders rely on for profits.”
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[1] According to the Letter, “the amount of 2Z transferred to each Network Provider depends on that Network Provider’s own utility in the Network—not the amount of 2Z they hold, nor the entrepreneurial efforts of any third party.”