The Securities and Exchange Commission’s (SEC) Division of Corporation Finance released a statement articulating its position that certain cryptocurrency staking activities fall outside the federal securities laws.[1] This development coincides with the House of Representatives introducing the Digital Asset Market Clarity Act, a comprehensive market structure bill for digital assets, signaling continued momentum toward regulatory clarity in the digital assets sector.

Covered Activities: Division’s Position on Three Staking Models

The Division expressed the view that three specific staking models do not constitute securities offerings under the Howey test. Self (or solo) staking is addressed most directly, where node operators stake their own crypto assets using their own validator infrastructure. The Division characterized this as purely administrative activity that generates protocol-determined rewards rather than profits from entrepreneurial efforts.

Self-custodial staking directly with third parties is also addressed favorably in the statement. Under this model, crypto asset owners retain custody of their assets while granting validation rights to third-party node operators. The statement noted that the node operator’s role remains ministerial rather than managerial, as they cannot guarantee or fix reward amounts beyond their service fees.

Custodial arrangements represent the most commercially relevant area covered by the statement. According to the Division, custodians may stake client assets provided certain conditions are met: customers retain ownership, custodians cannot use deposited assets for trading or leverage, and the custodian’s role remains limited to selecting validators rather than making discretionary investment decisions.

The statement also expressed the Division’s view that several “ancillary services” commonly offered by staking providers do not alter the legal analysis, including slashing coverage (indemnification against protocol penalties that forfeit staked assets for validator misconduct), early unbonding (allowing withdrawal of staked assets before the protocol’s required lock-up period ends), custom reward schedules, and asset aggregation to meet protocol minimums. The Division indicated these services maintain their non-securities character provided they remain administrative rather than managerial in nature.

What Remains Outside the Statement’s Scope

The Division’s statement contains important limitations on its applicability. It excludes staking services where providers guarantee, fix, or boost rewards beyond what the underlying protocol provides. Additionally, the Division’s position does not extend to arrangements where service providers decide “whether, when, or how much” to stake on a customer’s behalf, suggesting these retain potential securities law implications. The statement also does not cover arrangements where users transfer ownership of their crypto assets to service providers, or where custodians engage in trading, leverage, or other discretionary activities with deposited assets.

Further, the Division’s statement does not address liquid staking, restaking, or liquid restaking activities. This omission leaves questions unanswered for liquid staking and restaking protocols that issue transferable tokens representing staked or restaked positions.

For entities currently offering staking services, the statement provides welcome clarity for basic staking models but requires careful analysis of specific operational features. Companies should evaluate whether their services include excluded elements such as reward guarantees or discretionary asset management that could trigger securities registration requirements.

The statement may also have implications for spot Ether exchange-traded funds (ETFs), which currently operate under SEC restrictions that prohibit the staking of their underlying ether holdings. The Division’s characterization of certain staking activities as administrative rather than investment-oriented could signal potential receptiveness to allowing ETF staking, though any such development would require separate regulatory determinations.

Commissioner Crenshaw’s Dissent

Commissioner Caroline Crenshaw issued a dissenting statement, arguing that the guidance contradicts established court precedents, particularly recent federal court decisions in SEC enforcement actions that found staking services could constitute investment contracts. Crenshaw emphasized that courts have recognized entrepreneurial efforts in staking services, including asset pooling that increases validation likelihood, technical infrastructure deployment that enhances returns, and sophisticated software systems that enable retail participation. She argued these elements satisfy Howey’s “efforts of others” requirement, contrary to the Division’s characterization of staking as purely ministerial.

The Commissioner also criticized the guidance’s use of securities law terminology like “custodian” and “custody” for services that lack corresponding investor protections. She warned that the statement creates false impressions of regulatory oversight while leaving investors exposed to risks including protocol slashing, technical failures, and potential insolvency of service providers.

[1]See Katten’s Quick Reads coverage of recent SEC staff statements regarding the classification of memecoins, proof-of-work mining, stablecoins here and here.