U.S. SEC Says Staking on PoS Networks Not a Securities Transaction

The United States Securities and Exchange Commission (SEC) Division of Corporation Finance has given new guidance regarding crypto staking. According to the agency, certain blockchain staking activities do not involve the offering of securities.

SEC States Regulatory View on Staking

The Division stated that participants in Protocol Staking Activities do not need to register with the Commission transactions under the Securities Act.  The SEC emphasized that staking rewards are compensation for a service provided by node operators. They are not profits earned from others’ entrepreneurial or managerial efforts and, therefore, do not fall under securities regulation.

According to the division’s staffers, custodial staking does not qualify as a securities offering. This is because custodians do not directly decide how much is staked as they merely act as agents in the process.  The agency added that they do not view ancillary staking services as securities. These services include slashing, early unbonding, and alternate or reward payment schedules. They were described as “merely administrative or ministerial in nature.”

This policy shift comes after years of uncertainty and legal action against crypto exchanges offering staking services. For instance, in 2023, Kraken was forced to shut down its U.S. crypto staking service. The exchange also paid $30 million in settlements to the SEC.  

The agency, under Gary Gensler’s leadership, alleged that Kraken was offering unregistered securities. The SEC’s new stance is expected to bolster participation in PoS networks by alleviating legal concerns. It will also likely open the door for crypto ETFs to include staking features and offer extra yields to investors.

Mixed Opinions from SEC Commissioners

Republican SEC Commissioner Hester Peirce said the guidance was a welcome clarity for stakers and staking-as-a-service providers in the U.S. 

“Uncertainty about regulatory views on staking discouraged Americans from doing so for fear of violating the securities laws. This artificially constrained participation in network consensus and undermined the decentralization, censorship resistance, and credible neutrality of proof-of-stake blockchains,” she added. 

However, her receptive view was not shared by the SEC’s sole Democrat commissioner, Caroline Crenshaw. She criticized the guidance, labeling it another example of the SEC’s ongoing “fake it ‘till we make it” approach to crypto. She added that the statement offers an incomplete view of regulation and downplays the significant risks these products pose to investors.

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