Practical Implications of the SEC Staff’s New Staking Guidance
Date: 06/03/25
On May 29, 2025, the SEC’s Division of Corporation Finance (the “Staff”) issued a Staff Statement entitled “Certain Protocol Staking Activities” (the “Statement”) opining that routine, protocol-level staking of native tokens on public proof-of-stake (“PoS”) blockchain networks, as well as many types of staking services, do not constitute an “offer or sale of securities” subject to SEC enforcement oversight.
This common-sense clarification should provide significant comfort to businesses that wish to provide a variety of staking services, including node operators and custodial platforms. At the same time, the Statement takes care to exclude similar-sounding yield-generation schemes from the categories of activities that the new guidance deems to be outside the purview of SEC regulations. It bears noting that the Statement only reflects the SEC Staff’s current interpretation of the law, does not represent a formal position taken by SEC, and does not change any current law.
Although not binding, the Statement represents a significant shift from the prior administration’s enforcement approach, which included settled SEC charges against Payward Ventures Inc. and Payward Trading Ltd. (together, d/b/a Kraken) and enforcement actions against Coinbase Global Inc. and Binance Holding Limited alleging that custodial staking services were investment contract arrangements that involved the illegal sale of unregistered securities, as well as an enforcement action against Consensys Software Inc. alleging that non-custodial Ethereum (ETH) staking similarly involved illegal sales of unregistered investment contract securities. All three of the non-settled actions have been dropped since the new administration took office.
Several key insights emerge from the Statement:
- First, protocol staking does not constitute securities offerings when properly structured within the Staff’s framework, allowing U.S. staking service providers to support PoS security without the risk of being required to register their services as a securities offering with the SEC.
- Second, the critical distinction is between administrative/ministerial activities versus entrepreneurial/managerial activities—to benefit from the Staff’s position, staking service providers must avoid discretionary decision-making and guarantees of staking rewards.
- Third, the Statement addresses three specific staking models with defined requirements, providing a clear roadmap for industry participants to structure their product offerings in compliance with securities law.
This alert analyzes the Statement’s consideration of three specific staking models (solo/self-staking, delegated staking, and custodial staking), examines what types of staking arrangements fall outside the Statement’s scope, and discusses the practical implications for protocol developers, validators, and exchanges. It also reviews the significant U.S. tax uncertainties that remain unaddressed.
CahillNXT Alert - Practical Implications of the SEC Staff’s New Staking Guidance.pdf (pdf | 321.79 KB )