SEC Staff Declares Crypto Staking on Proof-of-Stake Blockchains Is Not a Security
The staff of the US Securities and Exchange Commission (SEC) has issued new guidance regarding common crypto staking activities, indicating that these activities do not violate securities laws.
In a statement from the SEC’s Division of Corporation Finance on May 29, it was noted that “Protocol Staking Activities,” such as crypto staked on a proof-of-stake blockchain, “do not need to register with the Commission for transactions under the Securities Act,” nor do they fall under “one of the exemptions from registration in the Securities Act.”
Furthermore, the SEC clarified that staking rewards are seen as compensation for services provided by node operators, rather than profits generated from “others’ entrepreneurial or managerial efforts,” thus exempting them from securities regulation.
The SEC’s Division of Corporation Finance stated that certain protocol staking activities do not constitute securities offerings. Source: SEC
Additionally, custodial staking cannot be classified as a securities offering, as custodians merely act as “agents in connection with staking” without directly determining how much is staked, according to the division’s staff.
The division’s staff further mentioned that ancillary staking services—such as slashing, early unbonding, and varied rewards payment schedules—are not considered securities, labeling them as “merely administrative or ministerial in nature.”
Other staking forms, such as liquid staking and restaking, were not discussed, and it’s noted in the staff’s statement that it “has no legal force or effect.”
During the Solana Accelerate conference held in New York in May, crypto industry groups urged the SEC to provide formal guidance on staking to address regulatory uncertainties faced by Web3 infrastructure providers.
One commissioner in favor, one against
Hester Peirce, a Republican SEC Commissioner and head of the agency’s Crypto Task Force, stated that this guidance offers “welcome clarity for stakers and staking-as-a-service providers in the United States.”
She expressed, “Regulatory uncertainties regarding staking have dissuaded Americans from participation due to fears of violating securities laws.”
“This has artificially limited participation in network consensus and has undermined the decentralization, censorship resistance, and credible neutrality of proof-of-stake blockchains.”
Related: SEC staff provides guidance on the applicability of securities laws to crypto
Conversely, Caroline Crenshaw, the SEC’s only Democratic commissioner, criticized the guidance, stating that it “fails to provide a dependable roadmap for determining if a staking service constitutes an investment contract under securities laws, as defined by the Howey test.”
She remarked, “The staff’s analysis may reflect some desires regarding the law, but it does not align with court rulings on staking and the longstanding Howey precedent.”
“This illustrates yet another instance of the SEC’s ongoing ‘fake it till we make it’ strategy regarding crypto—taking actions based on expected future changes while neglecting existing laws.”
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