United States securities and exchange commission logo
February 2, 2024
Salman Khan
Chief Financial Officer
Marathon Digital Holdings, Inc.
101 NE Third Avenue, Suite 1200
Fort Lauderdale, FL 33301
Re: Marathon Digital
Holdings, Inc.
Form 10-K for the
Fiscal Year Ended December 31, 2022
Form 10-Q for the
Quarterly Period Ended September 30, 2023
File No. 001-36555
Dear Salman Khan:
We have reviewed your February 1, 2024 response to our comment
letter and have the
following comments.
Please respond to this letter within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe a
comment applies to your facts and circumstances, please tell us why in
your response.
After reviewing your response to this letter, we may have
additional comments. Unless
we note otherwise, any references to prior comments are to comments in
our January 18, 2024
letter.
Form 10-Q for the Quarterly Period Ended September 30, 2023
Notes to Condensed Consolidated Financial Statements
Note 4 - Revenue From Contracts With Customers, page 11
1. As it relates to your
pool operator activities, we note your statement that, The Company s
ongoing major or
central operation is to provide bitcoin transaction verification services to
the bitcoin network
Please revise to indicate, if true, that you also provide these
services to the
transaction requestor, in addition to the bitcoin network.
2. As it relates to your
pool participant activities, we note that your reference to to
provide computing power
is too general to distinguish whether you provide a good or
service and too general
to describe the nature of such good or service. Please revise to
clarify, if true, that
as a pool participant in mining pools not operated by you that you
provide a service of
performing hash calculations for pool operators.
Salman Khan
FirstName LastNameSalman Khan
Marathon Digital Holdings, Inc.
Comapany2,NameMarathon
February 2024 Digital Holdings, Inc.
February
Page 2 2, 2024 Page 2
FirstName LastName
3. Your statement that The Company currently mines in a self-operated
pool appears to be
inconsistent with your disclosure that a pool in which nonconsolidated
entities participate
does not exist subsequent to May 2022 and, for the period from
September 2021 to May
2022, appears to conflate your pool participation activities and your
pool operator
activities. That is, as it relates to the activities of what you call
a self-operated pool for
all periods, including from September 2021 to May 2022 when
nonconsolidated entities
participated in your mining pool, it appears that your consolidated
financial statements
would depict you providing a transaction verification service, not a
service of providing
hash calculations. Please tell us if our understanding is correct. If
our understanding is
correct, reconsider the use of this phrase or make appropriate
clarifying revision.
4. Revise the table so that Operator - block reward revenue is not
characterized as revenue
from contracts with customers. Refer to ASC 606-10-50-4.
5. We note your disclosures related to your Operator revenue policy
indicating that a
contract is deemed to exist at the point in time that the performance
obligation is satisfied.
Please further revise your disclosure to include your assertions that,
if true:
the transaction requestor and the bitcoin network each have a
unilateral enforceable
right to terminate their respective contracts at any time without
penalty;
for each of these respective contracts, contract inception and
completion occur
simultaneously upon block validation; that is, the contract
begins upon, and the
duration of the contract does not extend beyond, the validation
of an individual
blockchain transaction; and
each respective contract contains a single performance
obligation to perform a
transaction validation service and that this performance
obligation is satisfied at the
point-in-time when a block is successfully mined.
6. Revise your Operator revenue policy to clarify, if true, that the
transaction price is fixed as
of the inception of each individual contract, contract inception
occurs at the same point in
time you validate a block, and that you measure such noncash
consideration at the point in
time the Company successfully validates a block, which is contract
inception.
7. Consider clarifying the statement within the first sentence of the
Participant revenue
policy that references only when the Company-operated mining pool
is not available.
We note this statement appears to be referring to the Company s
business practice, rather
than describing its accounting policy; however, as it relates to
business practice, it is not
clear what not available means and the frequency of this
occurrence. We also note that a
Company-operated pool does not exist after May 2022.
8. For your Participant revenue policy, we note the revised description
of your performance
obligation in response to prior comment 4. As previously requested,
please further revise
your disclosures throughout the policy to consistently describe the
nature of your
performance obligation. That is, revise references to computing power
or hash rate to
Salman Khan
FirstName LastNameSalman Khan
Marathon Digital Holdings, Inc.
Comapany2,NameMarathon
February 2024 Digital Holdings, Inc.
February
Page 3 2, 2024 Page 3
FirstName LastName
more accurately describe the performance obligation as a service to
perform hash
calculations for the pool operator. Please make similar revision to
references in your Pool
Operator policy in which you state that you engaged unrelated
third-party mining
enterprises ( pool participants ) to contribute computing power
and to contribute their
hash rate. In addition, in the 5th paragraph of your Participant
revenue policy, please
reconsider the appropriateness of referring to this as the primary
output of your ordinary
activities, considering you also generate revenue as a pool operator.
9. In your Participant revenue policy, as previously requested, please
revise to provide a
more precise description of the payout formulas and identify the
formula inputs that create
variability for each component of the payout formula (i.e., block
reward, transaction fee,
and pool fee rate). Also, please describe the measurement period for
the underlying
variables used to calculate the payout (e.g., for the 24-hour period
beginning at midnight
UTC daily). Also, ensure your disclosure articulates the difference
between PPS and FPPS
payout methodologies. For example, revise to clarify that, under FPPS,
transaction fees
are also earned in addition to the block reward. In addition, in your
description of rewards
paid only when the pool successfully mines a block, replace your
references to computing
power in describing your fractional share with more precise terms.
10. Please refer to the second paragraph in your Participant revenue
policy and revise your
disclosure to address the following:
Clarify, if true, that contract inception occurs once your
performance of hash
calculations commences. That is, clarify, if true, that your
enforceable right to
compensation only begins when you commence providing hash
calculation services
for the mining pool operator;
Revise the sentence that starts with These contracts are
period-to-period
contracts to be more precise. Similarly, remove the example
that refers to second,
minute or hour. For example, disclose your assertion that each
party has the unilateral
right to terminate the contract at any time without any
compensation to the other
party for such termination and, if true, that as a result the
contract is continuously
renewed many times throughout the day, such that the duration of
each contract is
less than daily; and
Clarify the statement indicating the implied renewal option is
not a material right.
More specifically, is it correct that there are no upfront
or incremental fees in the
initial contract and the terms, conditions, and
compensation amounts for the
renewal options are at the then market rates ?
11. In your Participant revenue policy, we note your disclosure that, for
PPS and FPPS
contracts, you measure revenue based on the average daily spot rate of
bitcoin. Please tell
us and clarify in your disclosure whether this is a simple average and
whether the average
is computed using spot prices on the date of contract inception. Also,
consider replacing
the reference to measuring revenue earned with noncash
consideration to better
Salman Khan
Marathon Digital Holdings, Inc.
February 2, 2024
Page 4
distinguish your policy for measurement pursuant to Step 3 of ASC 606
from recognition
pursuant to Step 5 of ASC 606.
12. We note that for third-party mining pools in which you participate
that pay rewards only
when the pool successfully mines a block that you measure noncash
consideration using
the spot rate of bitcoin at the time that the block is successfully
mined. We note that this
does not comply with the requirement in ASC 606-10-32-21 to measure
noncash
consideration at contract inception and is inconsistent with the
method you use to measure
noncash consideration in your other mine pool participant contracts
for which you
measure noncash consideration based on the average daily spot rate of
bitcoin on the date
of contract inception. Please revise to select an accounting policy
that uses the same
measurement approach for each date, consistently applied for all types
of participant
contracts, to measure the fair value of noncash consideration on the
date of contract
inception. Please provide us with your materiality analysis of the
impact of this correction
on each of the financial statement periods presented.
13. Please revise your Participant revenue policy to clarify for each
payout method whether
variable consideration is constrained and to reference in your
disclosure the threshold for
application of the constraint articulated in ASC 606-10-32-11. If
variable consideration is
constrained, clarify in your disclosure whether the uncertainties
underlying the constraint
are resolved on the date of contract inception.
14. In your Participant revenue policy, please revise to disclose when
revenue is recognized
and how that relates to the date on which control of the contracted
service transfers and
the date of contract inception. For example, if non-cash consideration
is recognized on the
same day that control of the contracted service transfers to the
mining pool operator and
that is the same day as contract inception, revise your disclosure to
state this.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations, page 30
15. We note your response to prior comment 4. As previously requested,
please also ensure
your disclosures in future filings elaborate on the underlying reasons
for the changes in
FirstName LastNameSalman Khan
each of the factors contributing to the change in cost of revenues
energy, hosting and
Comapany NameMarathon
other. Digital Holdings,
For example, provide Inc.of the impact that uptime
and average network
an indication
difficulty
February 2, 2024have
Pageon4 your bitcoin production costs.
FirstName LastName
Salman Khan
FirstName LastNameSalman Khan
Marathon Digital Holdings, Inc.
Comapany2,NameMarathon
February 2024 Digital Holdings, Inc.
February
Page 5 2, 2024 Page 5
FirstName LastName
Please contact Melissa Walsh at 202-551-3224 or Stephen Krikorian at
202-551-3488 if
you have questions regarding comments on the financial statements and related
matters.
Sincerely,
Division of
Corporation Finance
Office of Technology
cc: Zabi Nowaid