The U.S. Securities and Exchange Commission (SEC) issued new guidance on Thursday clarifying that most common crypto staking practices do not constitute securities transactions, resolving years of legal uncertainty surrounding the issue. According to the statement, “protocol staking,” which involves locking digital assets to support the functioning of decentralized networks, does not meet the definition of a security under the Securities Act of 1933 or the Securities Exchange Act of 1934, provided specific criteria are met.
The SEC explained that staking is tied to consensus mechanisms that govern transaction validation and network participation in proof-of-stake blockchain systems. In essence, crypto assets used to maintain these networks or earn rewards for doing so are not considered investment contracts. This development marks a significant shift from the SEC’s previous stance under former Chair Gary Gensler, who had broadly categorized many crypto-related activities as falling under securities laws.
Industry Welcomes Move, But Some Practices Still Under Scrutiny
The new guidance covers three primary staking models: self-staking (where individuals use their own assets), self-custodial staking (where users delegate staking tasks while retaining asset control), and custodial staking (where third parties stake assets on behalf of users). Notably, the document excludes more complex models like liquid staking and restaking, where providers retain decision-making power and which could still face regulatory scrutiny.
The crypto community largely welcomed the announcement as a move toward greater transparency. Michael Bacina of Global Digital Finance praised the SEC’s openness, stating, “Securities laws are meant to protect people from others mismanaging or stealing assets. Non-custodial staking shouldn’t fall under that category.” Bacina and other industry experts have long argued that staking is a technical necessity for network operations, not a profit-seeking investment scheme.
Despite the optimism, the Securities and Exchange Commission (SEC) emphasized that the guidance represents the views of staff and does not carry the legal weight of a formal rule or legislation. As such, while it signals a regulatory direction, it remains non-binding and may evolve with future enforcement actions or legal interpretations.
Dissent Within the SEC Raises Legal Concerns
Not everyone within the Securities and Exchange Commission (SEC) agrees with the new position. Commissioner Caroline Crenshaw issued a strong dissent, arguing that the agency’s latest guidance runs counter to established legal precedent. Citing recent enforcement actions involving major exchanges like Coinbase and Kraken, Crenshaw contended that the new approach could undermine the SEC’s credibility and legal authority.
She also pointed to a court case involving Binance, which was dismissed the same day, as further evidence of regulatory inconsistency. “This looks like a ‘fake it till we make it’ approach to crypto,” she wrote in her critique. “Instead of bringing clarity, the Commission’s actions continue to create confusion about what the law is and how it will be enforced.”
Crenshaw’s dissent highlights the ongoing internal debate over how to regulate digital assets, even as the industry seeks clearer guidelines. For now, the Securities and Exchange Commission (SEC’s) latest statement offers some relief to crypto stakeholders, but the legal and regulatory landscape remains fluid and contested.
Visit Mr. Business Magazine to read more.
