SEC Clarifies Liquid Staking Isn’t a Security Amid Project Crypto Push

The U.S. Securities and Exchange Commission (SEC) continues its objective to provide regulatory clarity for the crypto industry. This time, the Commission’s Division of Corporation Finance has stated that it doesn’t view liquid staking activities as securities.

Liquid Staking Activities Aren’t Securities, SEC’s Division Declares

In an SEC release, the Division of Corporation Finance said that it doesn’t view Liquid Staking Activities in connection with Protocol Staking as involving the offer and sale of securities within the meaning of the Securities Act.

As such, the SEC Division said that participants in this staking activity do not need to register with the Commission for transactions that fall under the Act or ones that fall within one of the Act’s exemptions from registration.

Furthermore, the Division of Corporation Finance also stated that it doesn’t view the offer and sale of Liquid Staking Receipt Tokens as being securities, unless the deposited Covered Crypto Assets are part of or subject to an investment contract.

In line with this, the Commission’s Division declared that Liquid Staking Providers involved in the process of minting, issuing, and redeeming Staking Receipt Tokens do not need to register those transactions. This also applies to persons engaged in secondary market offers and sales of these tokens.

The only exception is if the deposited Covered Crypto Assets are part of or subject to an investment contract. This latest regulatory guidance comes just days after the SEC launched its Project Crypto initiative.

The Division of Corporation Finance noted that this latest statement is part of the effort to provide greater clarity on the application of the federal securities laws to crypto assets. It is worth mentioning that SEC Chair Paul Atkins already mentioned during the launch of Project Crypto that most crypto assets are non-securities.

What It Means For The Crypto Industry

This latest guidance from the SEC is a massive boost for the crypto industry, considering how liquid staking has become an integral part of the industry. This is expected to pave the way for the Commission to approve this staking activity for the Solana ETFs.

As CoinGape reported, ETF issuers Bitwise and VanEck, alongside JitoLabs, Jito Foundation, Solana Policy Institute, and Multicoin Capital, had sent a letter to the agency urging them to approve Liquid Staking Tokens (LSTs) for these SOL ETFs and other crypto ETFs.

Furthermore, it is a positive for Liquid Staking Protocols such as Jito, Marinade Finance, Lido, and Etherfi. This means that LSTs like JITOSOL, JUPSOL, STETH, and BNSOL are not securities. It is also a positive for the native tokens of these protocols.

Meanwhile, crypto stakeholders have commented on this latest guidance from the SEC. Jito Labs’ lawyer, Rebecca Rettig, noted that the SEC has explained that Liquid Staking activities don’t create a securities transaction because they aren’t entrepreneurial or managerial activities. She added that LSTs aren’t securities and that she is ready to see them in ETFs.

Market expert Nate Geraci opined that this guidance was the last hurdle for the SEC to approve staking in spot Ethereum ETFs. He added that the reason for this is that LSTs will be used to help manage liquidity in these funds, which was a concern for the Commission.