Crypto staking on proof-of-stake blockchains not a security: SEC staff
US Securities and Exchange Commission staff has given new guidance around the most common crypto staking activities, saying they are not in violation of securities laws.
The SEC’s Division of Corporation Finance said in a May 29 staff statement that “Protocol Staking Activities” such as crypto staked in a proof-of-stake blockchain, “don’t need to register with the Commission transactions under the Securities Act,” or fall within “one of the Securities Act’s exemptions from registration.”
It added that staking rewards are compensation for a service provided by node operators, not profits earned from “others’ entrepreneurial or managerial efforts,” and do not fall under securities regulation.
Custodial staking also can’t be classified as a securities offering as custodians don’t have a direct role in deciding how much is staked and only act as “agents in connection with staking,” according to the division’s staffers.
The division’s staffers added that it also doesn’t view ancillary staking services, such as slashing, early unbonding, and alternate and rewards payment schedules, as securities, declaring them “merely administrative or ministerial in nature.”
Other forms of staking, such as liquid staking and restaking, weren’t addressed and the staff note said that its statement has “has no legal force or effect.”
During Solana’s Accelerate conference in New York in May, crypto industry groups urged the SEC to issue formal guidance on staking, citing regulatory uncertainty for Web3 infrastructure providers.
One commissioner in favor, one against
Republican SEC Commissioner and the agency’s Crypto Task Force lead Hester Peirce said the guidance was a “welcome clarity for stakers and staking-as-a-service providers in the United States.”
“Uncertainty about regulatory views on staking discouraged Americans from doing so for fear of violating the securities laws,” she said.
“This artificially constrained participation in network consensus and undermined the decentralization, censorship resistance, and credible neutrality of proof-of-stake blockchains.”
Related: SEC staff gives guidance on how securities laws could apply to crypto
Meanwhile, the SEC’s sole Democrat commissioner, Caroline Crenshaw, slammed the guidance, saying it “fails to deliver a reliable roadmap for determining whether a staking service” is an investment contract under securities laws, as determined by the Howey test.
“The staff’s analysis may reflect what some wish the law to be, but it does not square with the court decisions on staking and the longstanding Howey precedent on which they are based,” she said.
“This is yet another example of the SEC’s ongoing fake it till we make it approach to crypto — taking action based on anticipation of future changes while ignoring existing law.”
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