Crypto Staking Services Not Classified as Securities, According to the SEC
In a significant move for the crypto industry, the Securities and Exchange Commission (SEC) has clarified that most staking services do not involve securities, offering regulatory clarity for platforms like Coinbase, Kraken, and Lido.
The SEC's decision, published in a staff note, signals its likely enforcement approach towards crypto staking. The note clarifies that solo and pooled mining for proof-of-work blockchains will generally not be considered to involve securities. Similarly, rewards earned from network validation on proof-of-stake networks are treated as compensation for services rendered rather than profits from the efforts of others, removing such staking rewards from the securities classification.
This ruling removes a regulatory cloud that had limited institutional adoption of staking services. Staking services typically involve locking tokens to secure a network and earning a reward in return. The least contentious option for staking is when someone operates a node themselves, keeping custody of their assets and staking directly.
However, staking-related schemes that resemble yield farming, guaranteed ROI DeFi packages, or lending disguised as staking remain potentially classified as securities offerings and thus subject to SEC regulation.
The SEC's decision was based on the Howey legal test, which establishes whether there's an "investment contract." According to the test, for an arrangement to be considered a security, it must involve an investment of money, a common enterprise, an expectation of profit, and profits derived from others' efforts. The SEC now argues that legitimate staking activities tied directly to a network’s consensus mechanism do not meet the Howey test criteria for securities.
The SEC's interpretation does not cover liquid staking, re-staking, or liquid re-staking. A major question mark has hung over staking-as-a-service, where a third party performs the staking on behalf of the token owner. If a custodian is involved, the SEC's decision only covers the situation where the investor chooses how much to stake.
Commissioner Caroline Crenshaw, a Democrat, strongly disagrees with the SEC's interpretation and believes it conflicts with the law. She notes that the interpretation is just staff opinion and doesn't affect the law. The strong dissent from Commissioner Crenshaw suggests the SEC's interpretation could face challenges if the political landscape changes again.
The SEC's new interpretation is part of a broader initiative called Project Crypto, launched in 2025, which seeks to modernize digital asset regulation and replace the ambiguous Howey test framework with a clearer classification system. This project aims to reduce uncertainty around which crypto activities qualify as securities, remove regulatory barriers, and foster greater innovation and institutional participation in the US crypto market.
In summary, the SEC’s current position is that typical protocol staking aligned with network consensus is not a securities offering under the Howey test, whereas staking-related investment schemes promising profits from others’ efforts remain regulated as securities. The overarching regulatory approach is evolving to increase clarity and support legitimate staking participation while policing more speculative or deceptive arrangements. The CLARITY Act, a newly proposed digital asset legislation, does not explicitly cover staking. However, it aims to provide less vulnerability to future political shifts in digital asset regulation.
- The Securities and Exchange Commission (SEC)'s decision on most staking services not involving securities offers regulatory clarity for platforms like Coinbase, Kraken, and Lido within the crypto industry.
- The SEC's staff note clarifies that rewards earned from network validation on proof-of-stake blockchains are treated as compensation for services rendered rather than profits from the efforts of others, thereby removing such staking rewards from the securities classification.
- The SEC's new interpretation is part of Project Crypto, a broader initiative aiming to modernize digital asset regulation, replace the ambiguous Howey test framework, and encourage greater innovation and institutional participation in the US crypto market.
- In a significant move, the SEC's interpretation does not cover liquid staking, re-staking, or liquid re-staking, leaving a major question mark over staking-as-a-service where a third party performs the staking on behalf of the token owner.
- Commissioner Caroline Crenshaw strongly disagrees with the SEC's interpretation, suggesting potential challenges if the political landscape changes again, as the interpretation only represents staff opinion and doesn't affect the law.
