A newly released statement from the U.S. Securities and Exchange Commission (SEC) has provided long-awaited clarity on one of crypto’s most contentious regulatory questions: whether proof-of-stake (PoS) blockchain staking constitutes a securities transaction under federal law.
The SEC’s Division of Corporation Finance announced on May 29 that a broad category of staking activities does not meet the definition of securities under either the Securities Act of 1933 or the Securities Exchange Act of 1934. This guidance, which covers self-directed staking, third-party validator support, and custodial staking services, may have significant implications for the cryptocurrency industry - particularly crypto exchange-traded funds (ETFs) looking to offer staking rewards to investors.
According to the SEC’s internal legal interpretation, PoS staking where rewards are earned from the blockchain protocol itself - rather than through entrepreneurial efforts of a third party - does not meet the Howey test for securities. The Howey test is a four-pronged legal standard used to determine whether an asset qualifies as an investment contract and thus a security. Since staking rewards arise directly from the protocol’s operation, rather than from a centralized promoter, the SEC division argues these do not trigger federal securities laws.
In practical terms, this means that individuals who lock their assets in a PoS system to help secure a network and receive yield in return are not engaging in a securities offering, as long as they are not relying on a third party to generate that yield. The statement also notes that features such as early withdrawal options or slashing insurance do not, in themselves, constitute securities.
Hester Peirce, the SEC’s most consistently pro-crypto commissioner, echoed the division's logic at a public event, noting: "Providing security is not a security." Peirce has long argued for clearer regulatory guardrails for crypto that balance investor protection with innovation.
Implications for Crypto ETFs and Asset Managers
The SEC’s new stance may open the door for a new generation of staking-enabled crypto ETFs. Until now, regulatory ambiguity around staking has prevented fund issuers from including staking rewards in spot crypto ETF structures, particularly for Ethereum-based products.
ETF providers, such as Grayscale and ARK Invest, have been lobbying for permission to include staking features in their products. In April, the SEC extended the review period on whether to allow staking in proposed Ethereum ETFs, with a final decision expected by July 2025. The SEC’s clarification could significantly improve the odds of approval.
“This is a big deal for ETF providers who want to offer staking,” said Eleanor Terrett, host of Crypto in America, noting that the statement represents a shift in regulatory posture after months of hesitancy.
Legal experts see potential momentum for staking to become a standard feature in crypto fund products. Rebecca Rettig, Chief Legal Officer at Jito Labs, emphasized that staking is a core function of many PoS networks and integrating it into ETFs could improve returns and network participation.
For issuers, including staking in ETFs could allow them to offer yield-bearing versions of Ethereum and other PoS tokens, boosting competitiveness in an increasingly crowded market. However, operational and custody challenges remain. Staking within fund structures raises questions about delegation rights, slashing risks, and whether ETFs themselves should be active participants in blockchain governance.
Internal Dissent and Legal Complexity
Despite the SEC Division of Corporation Finance’s move toward clarity, not everyone within the agency agrees. Commissioner Caroline Crenshaw, a Democrat appointed by President Biden, issued a strong dissent. She argued that the staff guidance overlooks legal precedent and misrepresents how staking platforms function in the real world.
Crenshaw pointed out that multiple federal court rulings have classified staking-as-a-service arrangements - particularly those run by centralized intermediaries - as investment contracts. In her view, the new SEC guidance fails to differentiate between self-staking and platforms that pool user funds, promising passive income.
“These statements paint an incomplete picture that obfuscates, rather than clarifies, what the law is,” Crenshaw said. She also warned that such guidance may “do more harm than good” by giving market participants false confidence, especially in areas where regulatory enforcement is still evolving.
Her statement underscores ongoing divisions within the SEC on how to handle crypto regulation. The SEC has taken multiple enforcement actions against crypto platforms like Kraken and Coinbase for offering staking services without registering them as securities. Crenshaw's criticism suggests that while the Division of Corporation Finance has now carved out some types of staking from securities rules, enforcement policy may remain aggressive where platforms blur the lines.
Staking in the Broader Crypto Regulatory Landscape
The SEC’s recent stance on staking follows a similar clarification made earlier in March 2025 regarding proof-of-work (PoW) mining. In that case, the agency also stated that self-directed mining operations do not constitute securities offerings, signaling a broader effort to distinguish decentralized protocol operations from centralized investment schemes.
Together, these clarifications indicate a shift toward acknowledging that protocol-level participation - whether mining or staking - is fundamentally different from financial products sold by intermediaries. However, this nuanced approach may also complicate compliance for platforms operating in both domains.
For instance, centralized exchanges and custodial wallets that pool user funds and stake them on users’ behalf may still be viewed as offering securities, depending on how they market those services. The fine line between self-custodial staking and staking-as-a-service remains a potential flashpoint.
Final thoughts
The SEC’s latest position will likely influence ongoing discussions about crypto regulation in Congress, where several legislative proposals are under consideration to create a comprehensive framework for digital assets.
Clarity on staking could also impact how foreign regulators shape their policies, especially in jurisdictions that often follow the U.S. lead on securities law.
For now, ETF issuers and PoS participants have received a green light - albeit with caution signals flashing from within the agency. As the July deadline for Ethereum ETF approvals approaches, the industry will be watching closely to see whether staking becomes a standard feature in regulated financial products - or remains in regulatory limbo.