TLDR
- The SEC announced Thursday that most common crypto staking activities don’t qualify as securities transactions under federal law
- The guidance covers self-staking, self-custodial staking, and custodial staking on proof-of-stake networks
- Liquid staking and restaking practices may still be subject to securities laws and weren’t included in the guidance
- The staff statement is non-binding and doesn’t carry the force of law, only reflecting SEC staff views
- SEC Commissioner Caroline Crenshaw criticized the guidance, calling it a “fake it ’till we make it” approach
The Securities and Exchange Commission issued new guidance Thursday stating that most crypto staking activities don’t violate federal securities laws. The staff statement ends years of uncertainty for the crypto industry under previous SEC leadership.
The guidance applies to protocol staking that involves locking crypto assets “intrinsically linked to the programmatic functioning of a public, permissionless network.” These assets help participants engage in network consensus mechanisms that verify transactions and maintain network security.
Staking on specific protocols does “not involve the offer and sale of securities” under the Securities Act of 1933. The same classification extends to the Securities Exchange Act of 1934.
The announcement comes less than a month after major crypto firms urged the SEC to provide clear staking rules. These companies argued staking serves as a technical function needed to secure proof-of-stake networks rather than a securities offering.
Three Types of Covered Staking
The guidance covers three main staking categories. Self-staking allows participants to stake their own assets directly on networks.
Self-custodial staking lets asset owners delegate staking duties to node operators while retaining ownership. Custodial staking involves third-party custodians staking assets on behalf of customers.
Node operators, validators, custodians, and other entities providing these services fall under the new guidance. The SEC suggests treating staking similarly to Bitcoin mining, which received similar regulatory clarity last month.
However, the guidance excludes liquid staking and restaking practices. These services give providers control over staking decisions and may still face securities law requirements.
The staff statement notes it addresses protocol staking “generally rather than all of its variations.” This leaves some staking services in regulatory gray areas.
Industry Response and Commissioner Dissent
Crypto industry leaders welcomed the clarity after facing enforcement actions under former SEC Chair Gary Gensler. Multiple court cases involving major exchanges like Kraken, Coinbase, and Binance had challenged the SEC’s previous approach to staking.
“Given securities laws are designed to protect people from situations where others can mismanage their assets, it’s hard to see the policy reasons why non-custodial staking services should be pulled into a regulatory net,” said Michael Bacina from Global Digital Finance.
The guidance allows companies to offer services like pooled staking and insurance against slashing risks. Staking providers can now offer modified unbonding periods without being classified as asset managers.
Timing and ETF Implications
The announcement comes days before the SEC faces deadlines on applications for spot ether exchange-traded funds that include staking features. Industry experts expect the guidance to speed up approval processes for these products.
“This reaffirms that there’s going to be similar treatment for stakers that there is for miners,” said Alison Mangiero from the Crypto Council for Innovation. She called the statement “crucially important” given previous enforcement actions.
However, SEC Commissioner Caroline Crenshaw issued sharp criticism of the guidance. She argued the new rules contradict applicable laws and court precedent from recent crypto exchange cases.
Crenshaw called the approach a “fake it ’till we make it” strategy that “continues to sow uncertainty around what the law is.” She said the guidance runs counter to established legal principles.
The staff statement includes footnotes clarifying its narrow scope and non-binding nature. The guidance “has no legal force or effect” and doesn’t replace formal rulemaking by SEC commissioners.
The statement only addresses crypto assets without “intrinsic economic properties or rights, such as generating passive yield or conveying rights to future income.” This limitation may exclude certain staking arrangements from the new guidance.
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