SEC cooks up clarity on crypto staking

On May 29, 2025, the SEC issued a staff statement titled “Certain Protocol Staking Activities” (the “Staff Statement”) giving an opinion that routine, protocol-level staking of native tokens on public proof-of-stake blockchain networks, as well as some other staking, would not be considered the offer or sale of securities subject to registration and oversight by the SEC. The same day a second staff statement was published, noting that the provision of security for a loan does not always amount to a "Security" as defined in US law.

This follows on from the SEC investigating and declining to prosecute the movement of Ethereum to a proof-of-stake network in 2024. The second of the staff statements says:

Proof-of-stake network protocols are designed to encourage users to voluntarily coordinate and cooperate to secure the network. But uncertainty about regulatory views on staking discouraged Americans from doing so for fear of violating the securities laws. This artificially constrained participation in network consensus and undermined the decentralization, censorship resistance, and credible neutrality of proof-of-stake blockchains.

The recipe for clarity

The Staff Statements tread a careful line, making clear that individuals can stake without fear of prosecution by the SEC, and that certain kinds of staking products would not be considered to be securities under US law, including:

• self-custodial staking with third parties;

• operating a node to earn staking rewards;

• managing nodes for others where the nodes offer staking rewards;

• custodial operations, where a business holds another party's crypto for the sole purpose of staking that crypto and sending the rewards back to the owner, with the business only selecting which node to stake the assets to.

In addition, "Ancillary Services" are said to be outside the realm of what the SEC considers to be a security, such ancillary services include where slashing occurs to staked crypto, the early 'unbonding' of staked crypto (where crypto must be staked for a minimum period of time for certain rewards), delivery of rewards earlier than the protocol provides them (so long as not exceeding the total rewards provided by the protocol) and the aggregation of crypto with several other persons where individually they didn't have enough crypto to stake to obtain node rewards, but together they can achieve that number. The Staff Statements makes clear all of these ancillary services can be provided at once.

What's the critical ingredient?

The critical point of difference the Staff Statements find is that where a staking provider is making decisions or exercising discretion about how to stake a customers assets, then the current SEC will consider that amounting to a regulated product, but absent that discretion, the current SEC does not consider the staking products require their oversight.

This gives common-sense and clear guidance to staking businesses, which had uncertainty over their business models, despite staking being useful to secure proof of stake blockchain security. It has been welcomed by many in the crypto industry as being well-considered and clear. The inclusion of aggregation and early payments of rewards is somewhat surprising, as this goes beyond merely passing through rewards.

A burnt dissent

In the spirit of open dissent, Commissioner Crenshaw said in her response that the Staff Statement is inconsistent with current law, going on to say:

Today’s staff’s statement, the most recent in a series of Howey interpretations declaring that particular crypto products or services are not securities, is premised on the idea that protocol staking is an “administrative or ministerial activity” devoid of entrepreneurial effort. From there, staff concludes that third-party services that stake on behalf of customers are likewise not engaged in entrepreneurial efforts, and so not offering investment contracts under Howey. But investment contracts have been found to exist in a variety of circumstances where a promoter takes an established product or technology— which itself may not be a security or involve entrepreneurial effort— and “buil[ds] an enterprise on top of it.”

Commissioner Crenshaw also criticised the current SEC's crypto roundtables, saying that the current SEC leadership had not "initiate[d] rulemaking or take other formal regulatory action", without mentioning this same criticism was made of the prior SEC leadership. Commissioner Crenshaw's dissent implies the court's have found staking to be a security under US law, which needs to be unpacked. She refers to:

• An SEC prosecution of Kraken, which settled the case without admission.

• An interlocutory decision against Binance which was seeking to dismiss the SEC's case. There the Court found that there was a plausible argument the SEC could bring at final hearing on this point (this has not reached final hearing).

• An interlocutory decision against Coinbase in the same manner, where the SEC was found to have reasonably pleaded the matter.

International flavours of staking

In the Block Earner Federal Court decision at first instance in Australia (which is not binding in the US but reached a final hearing), a product called "Access" which gave customers access to DeFi staking via aggregation of their crypto with other customers was found by the Federal Court to be outside securities laws, and after an appeal to the Full Federal Court the other staking product offered by the Defendant was similarly found not to be within securities laws. That Full Federal Court decision is presently under appeal to the Australian High Court. Notwithstanding these decisions, ASIC has indicated in proposed updates to Information Sheet 225 that it considers at least some intermediated staking services to involve a financial service.

Earlier this year, the UK Treasury declared that 'eligible staking was not a 'collective investment scheme' - the UK equivalent of a product which would be registered and supervised in the US. That decision was similarly well received by the crypto industry and was made by a statutory instrument, giving it more weight than a regulatory body's statement.

How does this change the menu?

While the clarity from the SEC is welcomed, the strong dissent highlights sharply the philosophical divide between those who believe existing securities laws apply to crypto, and if it cannot fit those laws, it must change to meet them, ignoring that those changes would remove the very features of crypto which make it so innovative and that decentralisation does not fit well (or in many cases at all) with existing laws. Legislation, as has been progressing in the UK and announced for Australia, as well as bills being advanced in the US Congress, will be the only way to give the industry assurance that activities will be treated consistently even when the current leadership of a regulator changes. Well considered rule-making and clear guidance with fit-for-purpose laws balancing innovation and protecting consumers by using the very features of crypto which make it unique are still critical to the long term success of the industry. By Michael Bacina with Steven Pettigrove