On May 29, 2025, the U.S. Securities and Exchange Commission’s Division of Corporation Finance issued a statement clarifying its view that certain types of protocol staking—a process used in proof-of-stake (PoS) blockchain networks—do not involve the offer and sale of securities under federal law. The statement, which applies to staking activities involving “Covered Crypto Assets,” concludes that these activities are administrative or ministerial in nature and therefore fall outside the scope of the Howey test for investment contracts.

The Division’s position covers three common staking models: self-staking, self-custodial staking with a third party, and custodial staking through a service provider. In each case, the Division emphasized that the rewards earned are not derived from the entrepreneurial or managerial efforts of others, but rather from the protocol’s rules and the participant’s own actions.

To support its conclusion, the Division applied the Howey test, which asks whether there is an investment of money in a common enterprise with an expectation of profits from the efforts of others. According to the statement, protocol staking fails this test because participants retain ownership of their assets, rewards are earned by complying with protocol rules, not third-party management, and services like slashing protection or early unbonding are considered “ancillary” and not indicative of managerial effort.

The statement also notes that it does not address more complex staking models like liquid staking or restaking, nor does it carry legal force.

SEC Commissioner Caroline A. Crenshaw issued a dissent, arguing that the staff’s analysis misrepresents both the law and the facts. She pointed to recent court decisions that upheld the SEC’s enforcement actions against staking-as-a-service providers, where courts found that such services involved entrepreneurial efforts—including asset pooling, technical infrastructure, and liquidity enhancements—that satisfied the Howey test. Crenshaw criticized the staff’s framing of these features as “ancillary,” noting that courts have previously found similar features to be hallmarks of investment contracts. She also raised concerns about the use of terms like “custodian,” which may imply regulatory protections that do not exist in the crypto space. Crenshaw warned that the SEC’s current approach, which relies on staff statements and enforcement dismissals, sows confusion and undermines investor protection. As the crypto industry awaits a more comprehensive regulatory framework, stakeholders should remain cautious. The legal status of staking services may still depend on how they are structured and marketed, and whether courts continue to view them as investment contracts under existing law.