SEC Staff Releases Proof-of-Stake Crypto Staking Not a Security The U.S. Securities and Exchange Commission (SEC) issued new guidance in which it clarified that most protocol-level crypto staking on proof-of-stake (PoS) blockchains is not a security offering. Protocol Staking Not a Non-Security In a May 29 release , the SEC’s Division of Corporation Finance indicated that staking crypto through PoS mechanisms is not covered under the Securities Act. According to the staff, such activities “don’t have to register with the Commission” and do not require registration exemptions either. The guidance underscored that staking rewards are earned as compensation for providing a service — running validator nodes — and not based on others’ labor, a key distinction in securities law. Second, custodial staking — where a third party stakes on behalf of a user — is not a securities offering. Staff explained custodians are mere agents and have no control over how much is staked. Commissioner Peirce Praises Regulatory Certainty Republican SEC Commissioner Hester Peirce, who leads the agency’s Crypto Task Force, supported the action, maintaining it gives much-needed clarity to American crypto users. “Regulatory uncertainty about staking views discouraged Americans from staking,” she said, maintaining it also impeded network decentralization and consensus participation. Peirce has long maintained that a regulatory system that encourages innovation with clear rules for participants is necessary. Crenshaw Criticizes Legal Foundation But Democratic Commissioner Caroline Crenshaw was a strong critic of the guidance, declaring that it “falls short of providing a reliable roadmap” for staking classification on the Howey test, the judicial standard for determining securities. “The staff’s analysis is wishful thinking, not law,” Crenshaw said. “It’s another example of the SEC acting on assumptions of future legal outcomes.” Crenshaw warned that omitting settled court decisions could undermine investor protection and legitimacy of the SEC. The SEC’s latest move illustrates the internal conflict regarding regulation of cryptocurrency. Whereas Peirce views the guidance as pro-innovation, Crenshaw considers it a legally dubious deviation from disciplinary regulation. Crypto consumers and staking services providers will likely welcome the clarity — even as legal uncertainties may persist, subject to future enforcement actions and court interpretations.
