The U.S. Securities and Exchange Commission (SEC) has recently provided guidance on liquid staking activities, a move intended to clarify the application of federal securities laws to this growing area of crypto assets. However, while some industry players see this as a positive step, the guidance leaves several regulatory questions unanswered and could potentially face challenges.

Liquid staking involves staking crypto assets through a software protocol or service provider, in exchange for a "liquid staking receipt token". This token represents the staker's ownership of the staked assets and any accrued rewards. Unlike traditional staking, where assets are locked up, liquid staking allows users to maintain liquidity by trading or using these receipt tokens in other DeFi platforms.

The SEC's Division of Corporation Finance issued a statement indicating its view that, under certain circumstances, liquid staking activities do not constitute the offer and sale of securities under the Securities Act of 1933 and the Securities Exchange Act of 1934. SEC Chair Paul Atkins stated that this guidance is a significant step in clarifying the SEC's view on crypto asset activities that fall outside its jurisdiction.

This guidance arrives after previous regulatory developments regarding digital asset staking services. In May 2025, the SEC issued guidance on protocol staking, covering self-staking, custodial arrangements, and third-party staking, but it excluded liquid staking. The recent guidance also follows the SEC's voluntary dismissal in March 2025 of an enforcement action against a self-custodial wallet developer, who was charged in June 2024 with unregistered broker operations and securities offerings through its facilitation of liquid staking services.

The SEC staff applied the Supreme Court's Howey test, which determines whether an investment qualifies as a security. The SEC's analysis hinged on characterizing liquid staking providers' activities as "administrative or ministerial" rather than entrepreneurial or managerial. The SEC emphasized that liquid staking refers to depositing crypto assets with a third-party provider, which issues receipt tokens evidencing ownership of the staked assets. The SEC clarified that these receipt tokens themselves are not considered securities because providers act as agents, do not undertake managerial or entrepreneurial efforts, and merely facilitate staking on behalf of depositors.

Despite the clarification, the SEC's guidance leaves several open questions. The guidance is nonbinding and subject to change. The "facts and circumstances" qualifier in the SEC's statement suggests that the determination of whether a liquid staking activity is a security is highly dependent on the specific structure and operation of the protocol. This ambiguity could lead to uncertainty and potential legal challenges in the future. Industry participants have emphasized that blockchain's decentralized nature contrasts with traditional finance, urging tailored regulatory frameworks.

The guidance could also be contested based on the argument that liquid staking providers are indeed engaging in entrepreneurial or managerial efforts, particularly in how they manage the staking process, allocate rewards, and govern the protocol. Former SEC official Amanda Fischer compared liquid staking to Lehman Brothers-era risk-taking, sparking backlash from crypto leaders who defended the transparency of decentralized protocols.

The SEC's stance could pave the way for liquid staking ETFs. Firms like VanEck, Bitwise, and Jito Labs have already advocated for such products. With the SEC recognizing that properly structured liquid staking doesn't involve securities, the chances of approval for staking-linked financial products—including ETFs—could rise. This would give traditional investors a new avenue for crypto exposure, without needing to hold or stake tokens directly, potentially broadening access to DeFi yields via regulated instruments.

In conclusion, while the SEC's guidance on liquid staking provides some clarity, it also raises several regulatory questions and could be subject to contestation. The future of liquid staking regulation will likely depend on how these ambiguities are addressed and how the SEC adapts its approach to the evolving landscape of decentralized finance.