tl;dr
The SEC issued new guidance stating that most common crypto staking activities on public, permissionless proof-of-stake networks are not subject to federal securities laws if certain conditions are met. The guidance covers self-staking, self-custodial staking, and custodial staking but excludes prac...
The SEC clarified that most common crypto staking activities are not considered securities under federal law if specific conditions are met, ending previous regulatory uncertainty.
The guidance applies to protocol staking on public, permissionless proof-of-stake networks, including self-staking, self-custodial staking, and custodial staking, but excludes liquid staking and restaking.
The SEC staff's guidance is non-binding and reflects internal views, not enforceable law.
SEC Commissioner Caroline Crenshaw dissented, arguing the guidance contradicts legal precedents and creates regulatory uncertainty.
The SEC issued new guidance stating that most common crypto staking activities on public, permissionless proof-of-stake networks are not subject to federal securities laws if certain conditions are met. The guidance covers self-staking, self-custodial staking, and custodial staking but excludes practices like liquid staking and restaking, which may still be regulated.
This marks a shift from prior SEC positions labeling many crypto activities as securities. The guidance is non-binding and reflects SEC staff views. SEC Commissioner Caroline Crenshaw dissented, arguing the exemption contradicts laws and court precedents, criticizing the agency's approach as unclear and inconsistent.
The SEC confirmed that most common staking activities aren't subject to federal securities regulations, provided specific conditions are met. Protocol staking involves locking crypto assets that are "intrinsically linked to the programmatic functioning of a public, permissionless network."
Crypto assets may also be used "to participate in and/or earn for participating in such network's consensus mechanism," which are rules that help participants agree on the network's state and verify transactions. Staking on specific protocols does "not involve the offer and sale of securities" as defined under the Securities Act of 1933.
This non-security status extends to the Securities Exchange Act of 1934, effectively ending uncertainty after earlier SEC positions broadly labeling crypto as securities.
Michael Bacina of Global Digital Finance highlighted that the SEC's open and transparent decision-making is a strength of the U.S. system, noting that securities laws aim to protect investors from mismanagement or theft. Therefore, pulling non-custodial staking services into regulatory nets seems unnecessary.
Under federal law, securities are financial instruments like stocks, bonds, and investment contracts, where investors expect profits from others' efforts. The SEC’s latest guidance follows calls from major crypto firms urging clear rules on staking and its role in securing proof-of-stake networks, not as a securities offering.
Types of Staking Covered:
The guidance covers staking on proof-of-stake networks and third-party operators such as validators and custodians for earning rewards. It includes: self-staking (staking own assets), self-custodial staking (delegating to node operators while keeping ownership), and custodial staking (custodians staking assets for customers).
Excluded are liquid staking and restaking, where providers control staking decisions and may still fall under securities laws.
The SEC staff noted the guidance addresses protocol staking "generally rather than all of its variations." Importantly, this guidance is non-binding and does not carry the force of law.
Commissioner Disagrees:
SEC Commissioner Caroline Crenshaw strongly opposed the guidance, stating exempting crypto staking from securities regulation contradicts applicable laws and court precedents. She referenced cases involving Kraken, Coinbase, and a Binance dismissal, calling the SEC's approach a "'fake it 'til we make it' approach" to crypto.
Crenshaw criticized the guidance for sowing uncertainty about legal enforcement rather than promoting clarity.