TLDR
- The SEC has clarified that most common crypto staking activities are not subject to federal securities regulations when specific conditions are met
- The guidance covers self-staking, self-custodial staking, and custodial staking but excludes liquid staking and restaking
- The ruling ends years of uncertainty from the previous administration’s approach to crypto regulation
- SEC Commissioner Caroline Crenshaw criticized the guidance, calling it a “fake it ’till we make it’ approach
- The guidance is non-binding staff opinion and does not carry the force of law
The Securities and Exchange Commission issued new guidance Thursday stating that most common crypto staking activities do not violate federal securities laws.
The ruling ends years of regulatory uncertainty that plagued the crypto industry under previous leadership.
The SEC’s Division of Corporation Finance published a staff statement clarifying how regulators view proof-of-stake network activities. The guidance states that protocol staking does not “involve the offer and sale of securities” under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Protocol staking involves locking crypto assets that are “intrinsically linked to the programmatic functioning of a public, permissionless network.” These assets participate in network consensus mechanisms that help verify transactions and maintain network security.
The guidance covers three main types of staking activities. Self-staking allows participants to stake their own assets directly on networks.
Self-custodial staking lets asset owners delegate staking to node operators while maintaining ownership of their tokens. Custodial staking involves third-party custodians staking assets on behalf of customers.
Node operators, validators, custodians, and other entities providing these services now have clearer regulatory guidance. The ruling suggests staking will receive similar treatment to Bitcoin mining, which the SEC previously clarified does not implicate securities laws.
Coverage Limits and Exclusions
The guidance does not cover all staking variations. Liquid staking and restaking practices remain subject to potential securities law scrutiny.
These excluded activities involve providers having control over staking decisions that may still qualify as securities transactions. The SEC noted the statement addresses protocol staking “generally rather than all of its variations.”
The timing of the guidance comes days before the SEC faces deadlines on applications for staking-enabled Ethereum ETFs. Industry experts believe this clarity will accelerate approval processes for such products.
Lorien Gabel, CEO of staking firm Figment, said the statement provides clarity for previously uncertain activities. Companies can now offer ancillary services like slashing insurance and modified unbonding periods without securities law concerns.
Commissioner Opposition
SEC Commissioner Caroline Crenshaw issued sharp criticism of the new guidance. She argued the ruling contradicts applicable laws and court precedent from cases involving Kraken, Coinbase, and Binance.
Crenshaw called the agency’s approach a “fake it ’till we make it” method that creates more uncertainty. She claimed the guidance runs counter to established legal frameworks rather than promoting regulatory clarity.
The guidance represents a shift from the previous administration’s approach to crypto regulation. Former SEC Chair Gary Gensler previously labeled most crypto assets as securities during enforcement actions.
Michael Bacina from Global Digital Finance praised the SEC’s transparent decision-making process. He questioned policy reasons for subjecting non-custodial staking services to securities regulations designed to protect against asset mismanagement.
The staff statement includes important limitations on its authority. It reflects only SEC staff views and carries no legal force or binding effect on the agency or courts.
The guidance specifically addresses crypto assets without “intrinsic economic properties or rights” like generating passive yields or conveying business enterprise rights. Assets with these characteristics may still face securities law scrutiny under different circumstances.
