The U.S. Securities and Exchange Commission (SEC) has issued guidance clarifying its position on liquid staking activities, a move widely seen as a positive development for both the decentralized finance (DeFi) sector and institutional investors. The SEC's statement indicates that certain liquid staking activities and associated tokens, referred to as "Staking Receipt Tokens," do not fall under the definition of securities offerings under federal securities laws. As such, these activities would not require registration under the Securities Act of 1933 or the Securities Exchange Act of 1934.
Liquid staking involves staking digital assets through a protocol or service provider and receiving a "liquid staking receipt token" in return, which represents the staker's ownership of the staked assets and any accrued rewards. These receipt tokens can then be used in other DeFi applications, providing liquidity while the underlying assets remain staked.
The SEC's decision was reached after analyzing liquid staking activities and Staking Receipt Tokens under the Howey Test, which is used to determine whether a transaction qualifies as an "investment contract" and is therefore considered a security. The SEC concluded that Staking Receipt Tokens do not meet the "efforts of others" requirement of the Howey Test because the token's value is directly tied to the underlying staked crypto assets, rather than the entrepreneurial or managerial efforts of the liquid staking provider or third parties. The activities involved in minting, issuing, and redeeming Staking Receipt Tokens are considered administrative or ministerial, rather than investment-driven.
SEC Chair Paul Atkins hailed the guidance as "a significant step forward" in clarifying the agency's view on crypto asset activities that do not fall within its jurisdiction. He credited the SEC's Project Crypto initiative with producing results for the American people. This guidance is part of a broader shift in tone under Chair Atkins, who has prioritized the launch of "Project Crypto"—a comprehensive initiative to reassess the agency's oversight of digital assets, including trading, custody, and fund structures.
This clarification arrives amidst growing institutional interest in liquid staking exchange-traded funds (ETFs), with companies like Jito Labs, VanEck, and Bitwise advocating for the SEC to approve liquid staking strategies for Solana (SOL)-based funds. The SEC's guidance could pave the way for ETH ETF staking approval.
Liquid staking has emerged as one of the largest subsectors in the crypto market, with a total value locked (TVL) of nearly $67 billion across all protocols, according to DefiLlama. Ethereum accounts for $51 billion of that total.
The SEC's stance offers regulatory clarity for the crypto industry, especially concerning DeFi platforms and liquid staking protocols. By clarifying that liquid staking tokens are not automatically classified as securities, the SEC enables institutions to integrate LSTs into their products, potentially boosting revenue and expanding markets for staked assets through secondary trading. This may foster confidence among traditional investors, encouraging greater institutional participation in the market.
However, the SEC has emphasized that its guidance does not apply universally, and the classification of a token as a security depends on the specific facts and circumstances surrounding its issuance and use. This reaffirms the agency's position that a case-by-case analysis is necessary to determine a token's legal status. While the industry has welcomed the legal clarity, some experts note that the guidance may not cover all liquid staking activities. Additionally, because the directive is not legally binding, future SEC actions or leadership changes could alter the regulatory landscape.
