SEC Clarifies Liquid Staking Tokens Are Not Securities, Sparking Internal Debate
The U.S. Securities and Exchange Commission (SEC) has issued a new staff statement that brings much-needed clarity to how liquid staking is regulated within the cryptocurrency space. According to the statement, certain tokens associated with liquid staking—commonly referred to as “Staking Receipt Tokens”—do not qualify as securities under existing federal laws.
SEC Distinguishes Staking Tokens from Investment Securities
In its announcement, the SEC’s Division of Corporation Finance confirmed that the issuance, minting, and redemption of Staking Receipt Tokens—used in the process of staking crypto assets—are not subject to the Securities Act of 1933 or the Securities Exchange Act of 1934.
The SEC’s conclusion was based on the Howey Test, a long-standing legal framework for determining what constitutes an investment contract. The analysis found that these tokens derive their value solely from the performance of the staked assets, rather than from the efforts of a third party or staking provider. Because of this, the tokens are considered “administrative or ministerial” tools, not investment products.
Internal Pushback Within the SEC
Despite the clarity the statement aimed to provide, it has stirred controversy within the SEC itself. Commissioner Caroline Crenshaw criticized the announcement, calling it misleading and out of touch with the complexities of the crypto market. She argued that rather than clarifying, the statement “muddies the waters” and may actually increase uncertainty for stakeholders.
Crenshaw’s dissent highlights ongoing divisions within the SEC regarding its stance on crypto regulation. The agency appears to be shifting from the more aggressive approach seen under former Chair Gary Gensler to a comparatively open-minded perspective under current Chair Paul Atkins. Supporters of this shift—including Commissioner Hester Peirce—welcomed the new guidance and likened liquid staking to traditional financial practices like warehousing and the issuance of receipts.
Why It Matters
Liquid staking allows cryptocurrency holders to lock up their assets in proof-of-stake networks while receiving tradable tokens in return. These tokens can then be used in decentralized finance (DeFi) applications, greatly enhancing capital efficiency. The practice has seen explosive growth, with over $66.94 billion currently locked in liquid staking protocols, according to data from DeFiLlama.
While the SEC’s latest guidance offers some regulatory clarity, internal disagreements suggest the legal landscape for crypto remains fluid. Ongoing interpretations, court rulings, and future SEC actions will likely continue to shape how liquid staking and other DeFi innovations are treated under U.S. law.
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