SEC Staff provides clarification on Liquid Staking positions

cently set out in a statement, the Securities and Exchange Commission’s Division of Corporation Finance clarified its position on the issue of “liquid staking” and how it relates to federal securities laws. Liquid staking is a process that allows individuals who hold crypto assets to maintain liquidity by depositing these assets in exchange for staking receipt tokens. These tokens represent ownership of the deposited crypto assets and can be used independently of the original assets.

In a recent statement, the SEC Staff concluded that certain liquid staking activities, such as protocol staking, do not involve the offer or sale of securities under federal securities laws. They also determined that liquid staking providers primarily perform administrative functions rather than entrepreneurial or managerial roles. Staking receipt tokens, which are issued in exchange for staked crypto assets, were also deemed not to be securities.

The Securities and Exchange Commission’s Division of Corporation Finance released a statement regarding the implications of liquid staking activities on federal securities laws. This announcement follows a previous statement made in May 2025 about solo, self-custodial, and custodial protocol staking activities, clarifying that they did not violate securities laws. This recent statement further solidifies the regulatory clarity surrounding staking activities and the individuals and entities involved in them.

Liquid staking, a type of protocol staking, involves depositing crypto assets with a third-party provider in exchange for staking receipt tokens. These tokens represent ownership of the deposited assets and any rewards earned from staking. Depositors can use these tokens as collateral or in various crypto applications, allowing them to maintain liquidity without withdrawing their assets from the staking protocol. The process involves two types of providers: protocol-based providers that operate through a smart contract and third-party service providers who handle the assets and token issuance.

The Staff’s evaluation of liquid staking activities used the Howey test to determine if they constituted securities. This test examines whether an investment of money in a common enterprise with an expectation of profit derived from the efforts of others meets the criteria for an investment contract, and thus a security. The Staff concluded that the activities conducted by liquid staking providers and certain ancillary services do not involve the offer or sale of securities under federal securities laws.

Overall, the recent statement by the Securities and Exchange Commission’s Division of Corporation Finance provides clarity on the regulatory treatment of liquid staking activities. By applying existing legal frameworks such as the Howey test, the SEC has defined the boundaries of what constitutes a security in the context of protocol and liquid staking, ensuring that participants in these activities can operate within the bounds of the law.