U.S. SEC drops bombshell: Crypto staking on proof-of-stake blockchains is not a security

The U.S. Securities and Exchange Commission (SEC) has declared that crypto staking on proof-of-stake blockchains does not qualify as a security under federal law. The May 29 staff statement from the SEC’s Division of Corporation Finance offers long-awaited clarity for node operators and staking service providers, though dissenting voices within the commission warn the guidance “ignores existing law.”

SEC staff: Staking rewards are service payments, not securities

The SEC’s guidance explicitly states that crypto staking on proof-of-stake blockchains involves compensation for network validation services rather than investment contracts. “Protocol staking activities don’t need to register with the Commission under the Securities Act,” the staff noted, emphasizing that rewards stem from “technical participation” rather than managerial profit-sharing.

Crucially, the ruling extends to custodial staking, where third parties act as passive intermediaries. “Custodians merely facilitate staking, they don’t control the underlying assets,” the document clarifies. This distinction reinforces the SEC’s view that crypto staking on proof-of-stake blockchains operates outside traditional securities frameworks.

Industry celebrates clarity amid political divide

SEC Commissioner Hester Peirce, a Republican and crypto policy advocate, hailed the decision as a win for decentralization:

“Uncertainty had discouraged Americans from staking, undermining proof-of-stake networks’ neutrality. This guidance removes artificial barriers to participation.”

However, Democratic Commissioner Caroline Crenshaw blasted the move as legally dubious:

“The staff’s analysis contradicts court precedents like the Howey Test. This ‘fake it till we make it’ approach creates more confusion.”

The split reflects broader tensions as the SEC grapples with crypto staking on proof-of-stake blockchains. While the statement carries no legal weight, it signals a pragmatic shift for an agency often criticized for enforcement-heavy crypto regulation.

Unresolved questions: Liquid staking and restaking left in limbo

Not all staking models benefit from the clarity. The SEC excluded liquid staking and restaking from its guidance, noting the document has “no legal force.” Legal experts warn this omission leaves billion-dollar protocols like Lido and EigenLayer in regulatory gray zones.

At Solana’s Accelerate conference in May, industry leaders had urged formal rules. “Providers need certainty to innovate,” argued Web3 Foundation’s legal lead. The new guidance on crypto staking on proof-of-stake blockchains partially addresses these concerns but falls short of comprehensive policy.

What’s next for stakers and regulators?

The SEC’s stance reduces immediate compliance risks for crypto staking on proof-of-stake blockchains, but Crenshaw’s dissent suggests future legal challenges. Key takeaways:

1. Operational relief: Node operators and custodians can avoid securities registration.

2. Political risk: A change in SEC leadership could reverse the guidance.

3. Gaps remain: Liquid staking services must await further rulings.

As the debate continues, one fact is clear: crypto staking on proof-of-stake blockchains remains a pivotal battleground for crypto regulation. With the SEC’s staff and commissioners openly divided, the industry’s hope for stable rules hinges on Congressional action—or another landmark court case.