Crypto Staking Wins Partial Approval in SEC Policy Update

The staff statement pertains to staking of digital assets on public, permissionless proof-of-stake (PoS) networks. It covers so-called “covered crypto assets”, tokens intrinsically tied to network operations and consensus, that are staked to maintain network security and operation. The SEC staff concluded that participating in such protocol staking does not involve the offer or sale of securities under the Securities Act of 1933 or the Securities Exchange Act of 1934.

Under the Howey test, which determines whether an investment contract exists, the SEC focused on the “efforts of others” prong. According to the staff, protocol staking fails this prong because rewards derive from automated network operations and the staker’s own actions. There are no entrepreneurial or managerial efforts by a promoter or third party driving gains.

Three staking models are addressed: self (solo) staking, where owners operate their own validator nodes and retain full control of assets; self-custodial staking, where owners retain keys but delegate validation rights to third-party node operators; and custodial staking, where a custodian stakes assets on behalf of owners while preserving ownership and control under strict conditions (no lending, rehypothecation, or operational use of assets).

The staff also confirmed that ancillary services, such as slashing protection (insurance against validator penalties), early unbonding, alternate reward timing, and aggregation of staked assets, are administrative conveniences that do not convert staking into an investment contract.

Unlike traditional protocol staking, liquid staking, where users stake assets and receive tokenized “liquid staking tokens” representing their stake, was explicitly referenced in the statement. The SEC’s staff said certain liquid staking structures do not constitute securities offerings, depending on their design and compliance with conditions laid out in the guidance.

Liquid staking has become a major market force, with assets under management approaching US $67 billion globally, of which about US $51 billion is concentrated in Ethereum-based protocols, per DeFiLlama estimates.

The staff statement prompted sharply contrasting public responses from two SEC Commissioners. Commissioner Hester Peirce, known for her pro-crypto views, praised the clarification. She described staking as analogous to depositing property with an agent issuing a receipt, stating that the guidance provides welcome certainty to both individual stakers and staking-as-a-service providers in the U.S.

Commissioner Caroline Crenshaw, in stark opposition, argued that the statement “muddy the waters” by relying on assumptions disconnected from industry realities. She warned liquid staking firms to proceed with caution: “Caveat liquid staker.” She also emphasized that the statement is not binding, and legal risk persists, particularly with respect to private litigation and enforcement actions in cases that may involve more discretionary or entrepreneurial structures around staking.

While the SEC staff offers clear legal analysis, the guidance is non-binding. It does not guarantee immunity from enforcement actions or litigation. Firms engaging in more complex or custodial staking arrangements, particularly those that offer discretion in staking decisions or leverage staked assets, remain in regulatory gray areas.

Moreover, the guidance excludes other emerging models such as restaking, where liquid staking tokens themselves are used for further protocol activities, and newer constructs that may elicit different Howey dynamics.

This statement is part of a recent pivot by the SEC toward clearer crypto regulation. Over the past few months the agency has issued guidance on meme coins, stablecoins, crypto mining, and staking, indicating a shift from “regulation by enforcement” to a more structured, principles-based approach.

The timing also aligns with legislative efforts in Congress, including the Digital Asset Market Clarity Act, which aims to formalize regulatory frameworks for crypto markets, including staking and tokenized products.

For the crypto industry, especially staking platforms, this guidance offers operational frameworks to design compliant offerings. To align with the SEC’s views, providers must ensure they act as agents, preserve asset control for owners, avoid managerial discretion in staking decisions, and clearly disclose fees and structures.

Still, legal risk persists. Firms offering liquid staking or other innovative products should carefully assess whether their structures match the narrow conditions described, particularly regarding discretion, asset custody, and reward guarantees, before assuming they fall outside securities law.

This SEC staff statement marks a significant regulatory signal: staking a PoS network is not the same as selling a security. But its cautious boundaries underscore that structure matters and legal clarity depends on strict adherence to the protocols the staff defined.