SEC Clarifies PoS Staking Status

In a significant development for the cryptocurrency industry, the U.S. Securities and Exchange Commission’s (SEC) Division of Corporation Finance issued a statement on May 29, 2025, clarifying that certain proof-of-stake (PoS) blockchain protocol staking activities do not constitute securities transactions under federal law. This guidance is expected to provide much-needed clarity for participants in PoS networks and related service providers.

Understanding Protocol Staking

Protocol staking involves participants committing their crypto assets to a PoS network to validate transactions and secure the network. In return, participants earn rewards, typically in the form of additional tokens. The SEC’s statement specifically addresses three forms of protocol staking:

1. Self (Solo) Staking: Participants stake their own crypto assets directly on the network.

2. Self-Custodial Staking with Third-Party Node Operators: Participants delegate validation rights to a third-party node operator while retaining ownership and control of their assets.

Investor Identification, Introduction, and negotiation.

1. Custodial Staking: Participants entrust their assets to a custodian, who stakes them on their behalf.

SEC’s Legal Analysis

The SEC’s analysis centers on whether these staking activities qualify as “investment contracts” under the Howey test, which defines an investment contract as an investment of money in a common enterprise with an expectation of profits derived from the efforts of others. The SEC concluded that protocol staking activities do not meet the “efforts of others” prong of the Howey test. Specifically:

• Self (Solo) Staking: Rewards are earned through the participant’s own actions in validating network transactions, not through the efforts of others.

• Self-Custodial Staking with Third-Party Node Operators: The third-party node operator’s role is limited to administrative or ministerial services and does not involve entrepreneurial or managerial efforts.

• Custodial Staking: The custodian’s activities are similarly administrative or ministerial, such as holding assets and selecting a node to stake the assets with, and do not involve managerial or entrepreneurial efforts.

Ancillary Services

The SEC also addressed certain ancillary services related to protocol staking, including:

• Slashing Coverage: Reimbursement or indemnification against losses resulting from slashing.

• Early Unbonding: Allowing crypto assets to be returned to an owner prior to the protocol’s unbonding period.

• Alternative Reward Payment Schedules and Amounts: Delivering rewards at a cadence and in an amount that differs from the protocol’s set schedule.

• Aggregation: Pooling assets to meet a protocol’s staking minimums.

The SEC views these ancillary services as administrative or ministerial in nature and not as securities transactions.

Implications for the Cryptocurrency Industry

This clarification is a welcome development for platforms, staking service providers, and crypto holders. It validates the long-held view among crypto advocates that staking is an essential mechanism to ensure the safe and reliable operation of a blockchain rather than an investment activity. The SEC’s statement provides clarity that common forms of staking do not, standing alone, constitute securities offerings. This is a meaningful step in the direction of providing concrete guidance regarding fundamental activities in the crypto space.

However, the SEC’s statement is narrowly framed and fact-dependent. It addresses only prescribed protocol staking activities and not all variations of staking, including “liquid staking” (i.e., staking through a software solution that permits the crypto asset owner to obtain another digital token to retain liquidity) and “restaking” (i.e., using the same crypto asset for staking on multiple networks). The SEC’s guidance is also not binding and does not foreclose contrary SEC guidance or enforcement activity.

Conclusion

The SEC’s clarification on the non-securities status of certain PoS staking activities provides much-needed regulatory clarity for participants in PoS networks and related service providers. While the statement offers guidance on specific staking activities, it does not encompass all variations of staking and is not binding. Stakeholders should remain vigilant and consult legal experts to ensure compliance with applicable laws and regulations.

References

• SEC’s Statement on Certain Protocol Staking Activities: (sec.gov)

• SEC’s Statement on Protocol Staking: (sec.gov)

• SEC: Certain ‘Protocol Staking Activities’ Are Not Securities Transactions | Insights | Skadden, Arps, Slate, Meagher & Flom LLP: (skadden.com)

• SEC Staff Clarifies That Certain Staking Activities Are Not Securities (Crypto) | Lowenstein Sandler LLP: (lowenstein.com)

• SEC Staff Issues Statement on Protocol Staking Activities | Dechert LLP: (dechert.com)

• SEC issues statement reversing position on crypto staking – DLx Law: (dlxlaw.com)

• Crypto Staking: SEC Staff Clarifies Non-Security Status for Certain Protocol Activities | Insights | Jones Day: (jonesday.com)

• SEC Staff Statement Concludes Protocol Staking Is Not a Securities Transaction | Fenwick: (fenwick.com)

• Practical Implications of the SEC Staff’s New Staking Guidance | Cahill Gordon & Reindel LLP: (cahill.com)

• SEC Decides Staking Is Not (Always) A Securities Offering After All | Winston & Strawn: (winston.com)