US SEC Says Protocol Staking on Proof of Stake Networks Not Securities

The U.S. Securities and Exchange Commission (SEC) clarified on May 29, that certain protocol staking activities on proof-of-stake (PoS) blockchain networks do not qualify as securities offerings. The Division of Corporation Finance stated that staking on PoS networks, including related services, is not subject to federal securities laws registration or exemptions.

US SEC Clarifies Staking Activities Are Not Securities

According to the US SEC’s Division of Corporation Finance, participants in specific protocol staking activities do not need to register transactions with the Commission under the Securities Act. The guidance applies to self-staking by node operators, self-custodial staking with third parties, and custodial staking arrangements where a custodian stakes on behalf of asset owners.

Per the Division, staking rewards are compensation for the services node operators provide the network. These payments do not represent profits that others earn through being an entrepreneur or manager. As a result, staking is not covered by securities regulation.

In its statement, the SEC noted that custodians are simply agents and not parties involved in the transactions. They are not involved in choosing whether, when or what percentage of a user’s funds are locked up. Thereby, the view is strengthened that staking services are not subject to securities law requirements.

Ancillary Staking Services Classified as Administrative

The US SEC’s statement further clarifies that some related staking services are “administrative or ministerial” rather than entrepreneurial activities. Ancillary services discussed include slashing coverage, early unbonding options, alternative reward schedules, and asset aggregation to meet minimum staking requirements.

These services are often provided alongside staking but do not change the regulatory status of staking activities. The Division’s view is that these ancillary features do not turn staking services into securities offerings.

The clarification follows the SEC’s earlier position on proof-of-work mining, where it concluded that certain mining activities also do not constitute securities transactions.

Industry Engagement and Regulatory Context

The US SEC’s Crypto Task Force is currently interacting with different groups in the crypto industry. Part of the recent discussions involved discussing staking and crypto ETFs with BlackRock and several other leading firms. Some industry groups such as the Crypto Council for Innovation and the Proof of Stake Alliance, are demanding proper guidance on staking to prevent unnecessary regulations.

Earlier this week, the Ripple Chief Legal Officer wrote to the SEC, explaining that the most fungible crypto assets sold on secondary markets should not fall under securities. This approach matches the recent calls from the industry for clear rules about crypto assets and associated activities.

Through this new statement, the SEC intends to give individual stakers and staking companies operating in the US clear guidelines. It makes networking with consumers safe so that no one accidentally defies securities laws.

SEC Commissioner’s Response Highlights Legal Debate

Commissioner Caroline A. Crenshaw responded to the statement by pointing out differences between the staff’s view and established legal precedent. She noted that the Howey test remains the standard for defining investment contracts, and previous court rulings have identified staking services as securities in some cases.

Crenshaw emphasized that some features common to staking services—such as pooling investor assets, technical infrastructure, and risk protection, according to courts indicate managerial efforts under the Howey test. She raised concerns that the staff’s statement lacks detailed analysis consistent with these court decisions.

The Commissioner explained that the use of the word “custodian” in the statement does not reflect the type of protection given by securities law custodianship. According to her, assets secured by a stake are at risk from protocol issues, failures and thefts, but there are no regulations in place to handle this.

While the staff excluded staking services that make key decisions about assets from the safe harbor, it did not clarify how those decisions relate to staking programs in practice.