# SEC Drops Investigation into Stacks Bitcoin L2

*Author: David Christopher*
*Published: Jul 12, 2024*
*Source: https://www.bankless.com/sec-drops-investigation-into-stacks-bitcoin-l2*

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The SEC has dropped its three-year investigation into Hiro Systems, the blockchain software developer previously known as Blockstack behind Stacks (STX), which raised $70M through token sales from 2017 to 2019.

### What's the scoop?
- **Started as Securities:** When Hiro, formerly Blockstack, initially launched the Stacks chain and its STX token, these tokens were treated as securities with token sales conducted under SEC's Regulation A+, D, and S exemptions.
- **Decentralization Claim:** [In January 2021](https://www.coindesk.com/policy/2024/07/12/sec-drops-investigation-of-bitcoin-l2-stacks-builder-hiro-filing-says/), Hiro claimed the network had become fully decentralized and no longer treated STX tokens as securities.
- **SEC's Response:** The SEC was skeptical of this new definition, launching a probe in September 2021 to question Hiro's interpretation of its decentralization.

### Bankless Take:
As the second investigation that the SEC has ditched this week, [BUSD being the first](https://www.bankless.com/sec-ends-investigation-into-paxos-over-busd), there are some exciting implications here. Having a token be initially classified as a security before becoming sufficiently decentralized highlights a new potential path for token classification and a legal recognition and legitimization of decentralization. 

> 𝗡𝗘𝗪𝗦: SEC drops a three-year investigation into Stacks with no action.Earlier this week, we received word from the SEC that after 3 years, they are terminating their investigation into the [@Stacks](https://twitter.com/Stacks?ref_src=twsrc%5Etfw) blockchain (the protocol) and Hiro System (a company) with no action.Stacks…— muneeb.btc (@muneeb) [July 12, 2024](https://twitter.com/muneeb/status/1811759945219506425?ref_src=twsrc%5Etfw)
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