SEC Clarifies Liquid Staking Not Securities Under Certain Conditions

The U.S. Securities and Exchange Commission (SEC) has taken a significant step in clarifying the regulatory status of liquid staking activities under its Project Crypto initiative. On August 5, 2025, the SEC’s Division of Corporation Finance issued a staff statement confirming that liquid staking—where users lock crypto assets and receive tradable staking receipt tokens—does not constitute a securities offering under certain conditions [1]. This guidance provides much-needed clarity for crypto protocols and market participants navigating the evolving regulatory landscape.

According to the SEC, liquid staking activities do not meet the legal definitions of securities under the Securities Act or the Exchange Act, provided the underlying assets are not tied to an investment contract [2]. The agency emphasized that the actions performed by staking providers, such as minting, issuing, and redeeming tokens, are administrative in nature and do not involve the entrepreneurial efforts required under the Howey Test [3]. This distinction is critical, as it separates liquid staking from traditional investment vehicles and reduces the likelihood of regulatory overreach into decentralized mechanisms.

Receipt tokens issued through compliant liquid staking protocols are further characterized as utility tokens rather than securities. They function as receipts for the deposited crypto and accrued rewards, rather than as shares in a managed investment [4]. This aligns with the SEC’s broader efforts to differentiate between traditional financial instruments and innovative blockchain-based models. The agency has stressed that the guidance applies only to protocols operating without centralized control or investment-like features, underscoring the importance of structural compliance [5].

The guidance is part of the SEC’s Project Crypto initiative, which aims to bring greater flexibility and clarity to the regulation of digital assets. It is expected to benefit staking protocols such as Lido, Jito, and Marinade, as well as ETF issuers seeking to include liquid staking tokens (LSTs) in their products. These market participants can now operate with greater confidence, knowing that their activities may not trigger securities registration requirements, provided they adhere to the outlined structural conditions [6].

While the guidance reduces registration risks for liquid staking providers, it is important to note that it remains limited in scope and non-binding. The SEC emphasized that each protocol must still evaluate its own structure to ensure compliance with applicable laws [7]. Additionally, the agency retains enforcement discretion, meaning that deviations from the outlined criteria could still result in regulatory scrutiny. This underscores the need for ongoing legal and compliance diligence in the space.

The clarification is widely viewed as a positive development for the crypto industry. It supports the broader adoption of tokenized money markets and on-chain financial products by reinforcing the idea that these structures may not trigger securities laws if designed appropriately [8]. Industry advocates have welcomed the move as a step toward a more tailored regulatory approach that recognizes the unique characteristics of digital assets.

This guidance is part of a series of clarifications issued by the SEC in late July and early August 2025, reflecting the agency’s ongoing efforts to adapt to the evolving crypto ecosystem [9]. While the SEC has maintained a firm stance on certain token offerings, the new statement suggests a willingness to acknowledge the functional and structural differences between traditional securities and innovative blockchain-based models.

Source:

[1] https://www.ainvest.com/news/sec-clarifies-liquid-staking-tokens-securities-2508-85/

[2] https://cryptorank.io/news/feed/f6dee-sec-says-liquid-staking-and-receipt-tokens-may-not-be-securities-under-certain-structures

[3] https://www.ainvest.com/news/sec-clarifies-liquid-staking-security-federal-laws-2508/

[4] https://cryptorank.io/news/feed/89be6-sec-declares-crypto-liquid-staking-activities-as-non-securities-here-is-why-this-is-big-deal

[5] https://coinpedia.org/news/sec-says-lsts-are-not-securities-whats-the-impact-on-spot-crypto-etfs/amp/

[6] https://crypto.news/sec-clarifies-stance-on-liquid-staking-activities/

[7] https://www.coinlive.com/news-flash/865392

[8] https://x.com/0xBrans/status/195270148****437252

[9] https://www.sec.gov/Archives/edgar/data/1872195/000110465925073371/tm2421409-19_f1a.htm