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CORRESP
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filename1.htm

March
10, 2023

Securities
and Exchange Commission

Division
of Corporation Finance

100
F Street, NE

Washington,
D.C. 20549-4561

  Attn:
  Melissa Walsh

  Stephen Krikorian

  Re:
  Marathon Digital Holdings, Inc

  Form 10-K for the Fiscal year Ended December 31, 2021

  Form 10-Q for the Quarterly Period Ended September 30, 2022

  File No. 001-36555

Dear
Ms. Walsh and Mr. Krikorian:

This
letter constitutes the supplemental response (“Response”) of Marathon Digital Holdings, Inc. (the “Company”)
to your comment letter dated February 22, 2023 (the “Letter”) to Hugh Gallagher, Chief Financial Offer of the Company, relating
to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “2022 10-K”) and Form
10-Q for the quarterly period ended September 30, 2022 (the “Q3 2022 10-Q”). Please consider this an update to, and as appropriate
a revision of our responses dated March 3, 2023. Unless otherwise indicated, capitalized terms used herein have the meanings ascribed
to them in the 2022 10-K and Q3 2022 10-Q. For ease of reference, we have copied each comment verbatim in bold type from your
Letter and have placed our response immediately below each comment.

Form
10-Q for the quarterly period ended September 30, 2022

Notes
to Consolidated Condensed Financial Statements

Note
3 - Revenues from Contracts with Customers, page 11

5. As
                                            we continue to evaluate your accounting policy disclosure for your Participant, Private Pool
                                            Participant, and Operator revenue streams, please further revise your revenue recognition
                                            policy disclosure to ensure the following items are succinctly articulated:

 ● How
                                            you determine when a contract exists, including what consideration was given to whether the
                                            contracts are terminable by either party at any time without compensation;

 ● The
                                            nature of your performance obligations, ensuring consistent references to computing power
                                            and transaction verification services;

 ● How
                                            the transaction price is determined, including when you measure noncash consideration. In
                                            this regard, you disclose that it is measured at contract inception, but we also note your
                                            disclosures that it is determined using the daily closing rate. Please also clarify any reference
                                            to consideration as variable if it is known at contract inception;

 ● Whether
                                            your conclusion that the accounting convention for measuring noncash consideration is not
                                            materially different is based on the volatility of bitcoin on the day it is measured or for
                                            purposes of financial reporting; and

 ● Disclose
                                            the amount of revenue recognized from each of your types of arrangements in each of the periods
                                            presented.

Securities
Exchange Commission

March
10, 2023

Page
2

Supplemental
Response: The Company respectfully acknowledges the Staff’s comment and will accordingly revise its accounting policy
and expand its disclosures in the “Revenue From Contracts with Customers” section of the SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES Footnote to revise the revenue recognition policy in line with the disclosure requirements under ASC Topic 606, Revenue from
Contracts with Customers in our upcoming 10-K filing for the year ended December 31, 2022. The following responses correspond to each
point in the foregoing comment from the Staff. The responses below should be reviewed in conjunction with the revised revenue recognition
policy as stated below in comment 7.

a)
– c) The Company acknowledges the Staff’s comment and accordingly revised its revenue recognition policy. Please refer to
the respective sections for the revised policy stated in the response to comment 7 below.

d)
The Company has evaluated the quantitative impact of the difference between recognizing revenue at the fair value of bitcoin at contract
inception versus recognizing revenue using the accounting convention – i.e. at the daily closing U.S. dollar spot rate of bitcoin
on the date of contract inception (when the Company is a pool operator) or the date block rewards and transaction fees to which the Company
is entitled for its contribution to a third party mining pool is received (when the Company is solely a pool participant), respectively.
The impact is quantitatively immaterial to the Company’s consolidated statement of operations for all periods presented as indicated
below:

    (in thousands)
    Years
    ended December 31,

    2022
    2021
    (Restated)

    Operator

    Company’s accounting convention
    $ 113,491
    $ 138,589

    Revenues at contract
    inception
      113,856
      138,595

    Difference
      (365 )
      (6 )

    Participant

    Company’s accounting convention
      4,262
      20,574

    Revenues at contract
    inception
      4,236
      20,619

    Difference
      26
      (45 )

    Total
    Revenue

    Company’s accounting convention
      117,753
      159,163

    Revenues at contract
    inception
      118,092
      159,214

    Difference
      (339 )
      (51 )

e)
Please refer to the disaggregation of revenues recognized for each of our identified revenue streams as presented in our revised revenue
recognition policy in the response to comment 7 below.

Securities
                                            Exchange Commission

March
10, 2023

Page
3

6. In
                                            order to help us to continue to evaluate your accounting policy for your participation in
                                            third party bitcoin mining pools, please address the following:

a)
Clarify for us whether your contracts with third party bitcoin mining pool operators are terminable by either party at any time without
compensating the other party for the termination (that is, other than paying amounts due as a result of goods or services transferred
up to the termination date).

b)
Clarify for us whether you are only entitled to consideration for computing power provided for the successful placement of a block
on the bitcoin blockchain by the third party and that you are not entitled to any compensation for computing power provided for unsuccessful
attempts to place a block on the bitcoin blockchain by the third party.

c)
Provide your materiality analysis for the difference between your accounting convention for measuring noncash consideration received
for your third party pool participation for each quarterly and year-to-date period through December 31, 2022.

Supplemental
Response: The Company respectfully acknowledges the Staff’s comment along with previous comments and will accordingly
revise its accounting policy and expand its disclosures in the “Revenue From Contracts with Customers” section of the SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES Footnote in our upcoming 10-K filing for the year ended December 31, 2022. The following responses
correspond to each point in the foregoing comment from the Staff. The responses below should be reviewed in conjunction with the revised
revenue recognition policy as stated below in comment 7.

a)
We acknowledge the Staff’s comment and confirm that our contracts with third-party mining pool operators are terminable at any
time by either party for convenience without compensating the other party for such termination. As such, the company has determined that
these contracts are period-to-period contracts with each such period reflecting a distinct increment (i.e. a minute) of time. Both the
third-party pool operator and the Company have the unilateral right to terminate the contract at any time without penalty (i.e., the
Company has the right and ability to stop providing computing power and the third-party pool operator could disband or shut down the
mining pool). Notwithstanding that there is a contract for the current period during which the Company is providing computing power to
the pool, all subsequent periods reflect wholly-unperformed contracts (i.e. the Company has not yet transferred any promised services
to the pool operator and has not yet received, nor is entitled to receive, any compensation for those as yet unperformed services) such
that a contract does not yet exist for computing power the Company may provide in those future periods. A new contract is determined
to exist each period that neither party terminates the arrangement.

Securities
                                            Exchange Commission

March
10, 2023

Page
4

b)
We acknowledge the Staff’s comment and confirm that the Company is only entitled to consideration for computing power provided
for the successful placement of a block on the bitcoin blockchain by the third-party mining pool and that the Company is not entitled
to any compensation for computing power provided for unsuccessful attempts to place a block on the bitcoin blockchain by the third party.
The Company clarifies that for each period-to-period contract (see a.), the consideration to which the Company is entitled for contributing
computing power to the mining pool is variable as (1) it is unknown whether a block will be won by the pool during that contract period
and therefore, whether the Company will receive any remuneration for the computing power provided during that contract, and (2) the amount
of the fractional share block reward and transaction fees to which the Company will be entitled if a block is won during the contract
period is unknown. Elaborating on (2), the amount of remuneration to which the Company is entitled is not known at the time a block is
won as the transaction fees per block, and the proportion of the Company’s contributed computing power to the pool (which have
significant effect on the fractional share of the block reward and transaction fees to which the Company is entitled) are both unknown
until settlement into the Company’s wallet. The Company considered ASC 606-10-32-12 in assessing whether it is probable that a
significant revenue reversal could occur from estimating its fractional share variable consideration and determined that the following
factors suggest a significant revenue reversal could result from estimating that consideration:

    ●
    The
    amount of consideration is highly susceptible to factors outside the Company’s influence; the Company has no control over or
    visibility into the total transaction fees included in the block, or what proportion of hash power it contributed to the successful
    block;

    ●
    The
    Company’s experience with the consideration to which it was entitled for one block (e.g. previously won by the pool) has no
    predictive value to estimating this amount for a current or future won block; and

    ●
    (e)
    There are always a broad range of possible consideration amounts to which the Company could be entitled because the transaction fees
    vary from block to block, as does the Company’s proportional contribution of computing power to the pool.

Given
the above, the Company determined that it is not probable a significant revenue reversal would not result from including an estimate
of the consideration amount in the contract’s transaction price before settlement of the consideration into the Company’s
wallet occurs. As such, the Company constrains the transaction price to zero until settlement in accordance with ASC 606-10-32-11. This
has the practical effect of deferring revenue recognition until settlement occurs.

Once
variability is resolved (i.e., at settlement), the Company measures the bitcoin to which it is entitled using the daily closing U.S.
dollar spot rate of bitcoin on the date of settlement, instead of the fair value of the bitcoin at contract inception. This method is
used because, as a participant in a third party pool, the company has no visibility into the exact time of contract inception and it
is therefore impossible to fair value the revenue recognition at the contact inception. See further discussion on evaluation of the quantitative
impact of measuring the Company’s bitcoin revenue using the settlement date closing U.S dollar spot rate versus contract inception.

Securities
                                            Exchange Commission

March
10, 2023

Page
5

The
Company has updated its Participant revenue recognition policy accordingly.

 d) The
                                            Company has evaluated the quantitative impact of the difference between recognizing revenue
                                            at fair value of bitcoin at contract inception (i.e., upon successful placement of a block
                                            on the bitcoin blockchain) versus recognizing revenue at the daily closing U.S. dollar spot
                                            rate of bitcoin on the date of receipt of the block rewards and transaction fees to which
                                            the Company is entitled for its contribution to a third-party mining pool. The Company typically
                                            receives its settlement within 24 hours of contributing to the winning of a block. If a block
                                            is won over a holiday or a weekend, the settlement could take longer, conceivably up to 72
                                            hours. Because the Company does not have visibility into the exact moment of contract inception,
                                            the Company performed an analysis to compare the price at which it measured its non-cash
                                            bitcoin revenue (i.e., using the daily closing U.S. dollar spot rate of bitcoin on settlement
                                            date) to the daily low, average and U.S. dollar spot rate of bitcoin for the prior 24 hours,
                                            which is the typical settlement timeframe. The Company also performed the same analysis for
                                            48 hours, and 72 hours prior to ensure it captured the “worst-case scenario”
                                            for all affected transactions. The impact is quantitatively immaterial to the Company’s
                                            consolidated statement of operations for all periods presented as follows. Note that the
                                            Company participated in its own pool during the three months ended March 31, 2022, which
                                            is why that period is not presented below:

For
the interim periods and year ended December 31, 2022 (in thousands)

    Three months
    ended June 30:

    Sensitivity
    analysis
    Variance

    Actual
    low
    avg
    high
    low
    avg
    high

    24-hour sensitivity
    $ 633
    $ 617
    $ 636
    $ 655
    $ 16
    $ (3 )
    $ (22 )

    48-hour sensitivity
      633
      617
      639
      661
      16
      (6 )
      (28 )

    72-hour sensitivity
      633
      621
      644
      669
      12
      (11 )
      (36 )

    Three months
    ended September 30:

    Sensitivity
    analysis
    Variance

    Actual
    low
    avg
    high
    low
    avg
    high

    24-hour sensitivity
      2,607
      2,522
      2,580
      2,637
      85
      27
      (30 )

    48-hour sensitivity
      2,607
      2