On 29 May 2025, the Division of Corporation Finance of the United States Securities and Exchange Commission (US SEC) issued an interpretive statement titled “Statement on Certain Protocol Staking Activities.” This statement provides the US SEC Division of Corporation Finance’s views on whether specific staking arrangements on public, permissionless networks that use proof-of-stake (PoS) consensus mechanisms involve the offer or sale of securities under the United States Securities Act of 1933 and the United States Securities Exchange Act of 1934. The analysis applies the legal test established in SEC v. W.J. Howey Co. (1946) to self-staking, third-party delegated staking, and custodial staking models involving crypto assets that are integral to the operation of PoS networks—referred to as “Covered Crypto Assets.” The US SEC Division of Corporation Finance concluded that when staking activities are merely administrative or ministerial and do not depend on the entrepreneurial or managerial efforts of others, such activities do not fall within the statutory definition of a security. Although the statement does not carry the binding force of law, it provides compliance clarity for entities engaged in staking-related services. Crypto Staking service providers, validators, and custodial platforms must structure their services in a manner that avoids discretionary control or revenue guarantees and clearly distinguishes staking activities from investment contracts.
Definitions
Cryptoasset:
For the purposes of this statement, a crypto asset is defined as a digital asset generated, issued, and/or transferred using blockchain or similar distributed ledger technology. This includes “tokens,” “coins,” “digital assets,” and “virtual currencies,” and depends upon cryptographic protocols for security and functionality.
Network:
A network refers to a crypto network, a decentralised digital infrastructure based on blockchain or distributed ledger technology where transactions and data are recorded immutably.
Covered Crypto Asset:
A Covered Crypto Asset is a crypto asset that is intrinsically linked to the operation of a PoS network and used in the execution, validation, or maintenance of its consensus mechanism. These assets do not have standalone economic rights such as yields, profit claims, or entitlements to business income.
Protocol Staking:
Protocol Staking refers to the process whereby participants stake Covered Crypto Assets on a PoS network to validate transactions, update the blockchain, and secure the network, thereby earning protocol-defined rewards. It includes activities by solo stakers, delegates, and custodial agents.
Service Providers:
Service Providers in this context include third-party entities engaged in staking-related functions such as Node Operators, Validators, Custodians, Delegates, and Nominators, either directly or via ancillary services like slashing coverage or reward scheduling.
Ancillary Services:
Ancillary Services are add-on administrative or logistical services that support protocol staking but do not constitute managerial or entrepreneurial efforts under securities law analysis. These may include slashing indemnity, early unbonding, alternative reward distribution, and stake aggregation.
Compliance Perspective:
Crypto entities must ensure these terms are reflected precisely in their internal documentation, consumer interfaces, and risk statements. Misclassification or imprecise communication may attract regulatory scrutiny under the “economic reality” test even if the activity appears compliant.
Protocol Staking and Consensus Structure
The US SEC Division of Corporation Finance explains that PoS networks rely on a cryptographically enforced consensus mechanism that rewards Validators for confirming network transactions. To qualify as a Validator, a Node Operator must “stake” Covered Crypto Assets through the network’s software protocol. The staked assets are locked via smart contracts, and in return, Validators earn newly minted tokens and transaction fees. Crypto entities must ensure that staking rewards are protocol-driven and non-guaranteed. Any deviation, such as fixed return schemes or discretionary pooling, may recharacterise the activity as a security offering.
Self (or Solo) Staking is Ministerial, Not an Investment Contract
According to the US SEC Division of Corporation Finance, when a Node Operator stakes its own Covered Crypto Assets and validates transactions directly, the activity does not satisfy the “efforts of others” prong of the Howey test. The Node Operator’s reward is tied to its own technical participation and not to the success of any entrepreneurial venture led by a third party. Crypto entities facilitating solo staking should document and disclose that the staker retains full custody, makes independent operational decisions, and earns protocol-level rewards. Platform features must not introduce passive earning elements or third-party performance dependencies.
Delegated Self-Custodial Staking Remains Outside Securities Scope
In models where asset owners delegate validation rights to a Node Operator while retaining control over their assets and private keys, the US SEC Division of Corporation Finance maintains that rewards are not the result of others’ managerial efforts. The Node Operator merely performs automated or mechanical tasks without discretion over asset management or reward structuring. Crypto firms supporting delegated staking must ensure the validator operates purely as an agent, not as a manager or reward guarantor. Any terms suggesting strategic decision-making, yield generation, or portfolio optimisation would likely trigger securities analysis.
Custodial Staking is Permissible if the Custodian Acts as an Agent
Where staking is facilitated by a Custodian holding crypto assets on behalf of customers, the US SEC Division of Corporation Finance distinguishes such arrangements from investment contracts, provided that the Custodian exercises no discretion over whether or when to stake, and assets are never lent, pledged, or reused. The customer retains beneficial ownership, and the Custodian’s role remains purely administrative. Crypto Custodians should operate under clear non-discretionary frameworks, supported by user agreements affirming customer ownership and limiting the Custodian’s role to protocol execution. Use of pooled assets or discretionary delegation may alter the regulatory character of the staking service.
Ancillary Services Do Not Constitute Entrepreneurial Effort
The US SEC Division of Corporation Finance further clarifies that services such as slashing indemnity, early unbonding, or reward forwarding are logistical conveniences that do not rise to the level of entrepreneurial or managerial efforts. Their availability does not alter the staking relationship into one of investment dependency. Crypto platforms offering ancillary services should avoid combining them with speculative incentives or bundling them into products marketed as yield instruments. Transparency and service segregation will be key to maintaining compliance integrity.
Economic Reality and the Howey Analysis Anchor the Regulatory Position
The US SEC Division of Corporation Finance reiterates that the Howey test remains the guiding standard for determining whether staking arrangements amount to securities. Central to the analysis is whether there exists a common enterprise and a reasonable expectation of profits derived from others’ significant managerial efforts. Ministerial acts, regardless of their necessity or frequency, do not satisfy this requirement. Crypto businesses should also conduct Howey analyses on a per-activity basis, documenting the absence of speculative structures, central managerial functions, or investor-like expectations. Internal legal reviews should accompany any new staking service launch.
Jurisdictional Scope and Legal Limitations
The US SEC Division of Corporation Finance emphasises that its views are non-binding and contingent upon the specific facts presented. Variations in practice, such as offering fixed returns, liquid restaking, or discretionary asset pooling, could lead to a different regulatory conclusion. The statement also excludes analysis of “liquid staking” and “restaking” models, which may involve distinct legal risks. Crypto entities should not treat this statement as a blanket exemption. Novel staking variations or composite DeFi protocols must undergo separate legal evaluation to avoid assuming regulatory safety where ambiguity remains.
The US SEC’s Division of Corporation Finance has offered a practical interpretation of Crypto staking arrangements, based not on nomenclature but on the functional and economic substance of the activity. The regulatory theme is that crypto staking may be compliant when it resembles a decentralised network utility function and not an investment scheme. However, the guidance also leaves the door open for enforcement where staking models exhibit profit dependency, passive participation, or custodial misuse. Crypto platforms, validators, and custodial agents, when operating within the strict technical parameters of PoS protocol design, staking may be legally permissible. But deviation into speculative architecture, third-party discretion, or opaque reward systems could convert an otherwise exempt activity into a regulated securities transaction. Legal, compliance, and product teams must work collaboratively to embed these principles across smart contracts, disclosures, and operational protocols.
