Is Staking a Security? Here’s What the US SEC Says

Key Notes

• Staking rewards are classified as services by node operators, not profits derived from managerial efforts, said the SEC.
• The SEC clarified that custodial staking does not fall under securities laws, as custodians act as agents without direct control over staking amounts.
• Hester Peirce hailed the decision as a step toward regulatory clarity, which could open the gates for enabling staking for Ethereum ETFs.

In a big decision, the US Securities and Exchange Commission (SEC) has issued fresh guidance stating that crypto staking activities do not violate the securities laws. This will be particularly beneficial to Proof-of-Stake (PoS) blockchains like Ethereum

ETH $2 621

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, and opens up the door for introducing staking facilities on Ether ETFs.

In a staff statement on Thursday, May 29, the SEC’s Division of Corporation

Finance noted that “Protocol Staking Activities” on a PoS blockchain fall within one the the Securities Act exemptions and thus they “don’t need to register with the Commission transactions under the Securities Act”.

Furthermore, it classified staking rewards as a service provided by node operators and not profits earned through “managerial efforts”. Hence, it doesn’t fall under the securities regulation, noted the SEC.

SEC: Custodial Staking Won’t Fall Under Securities Laws as Well

Furthermore, the SEC noted that the custodial staking won’t follow under securities laws since custodians don’t get to directly decide the staking amount and only act as “agents in connection with staking”.

Hester Peirce, Republican SEC Commissioner and head of the agency’s Crypto Task Force, described the guidance as a significant step toward providing clarity for stakers and staking-as-a-service providers in the United States. Peirce said:

“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.”

The recent development could clear the pathway for staking on spot Ethereum ETF, which has been waiting for the SEC clearance at the moment. Crypto asset manager Grayscale has already been pushing for the Ether ETF staking facility. Inflows into spot Ether ETFs are once again gathering pace, with nine consecutive days of inflows.

In addition to this, the division’s staff clarified that ancillary staking services, including slashing, early unbonding, and alternate rewards payment schedules, are not considered securities, describing them as “administrative or ministerial in nature”.

However, the guidance did not address other staking models like liquid staking and restaking. The staff emphasized that their statement “has no legal force or effect”.

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