SEC Clarifies Liquid Staking Tokens Not Securities Under Specific Conditions

The U.S. Securities and Exchange Commission (SEC) has issued updated guidance clarifying that certain liquid staking activities involving cryptocurrencies do not constitute securities offerings, provided specific conditions are met. This marks a key step in the SEC’s ongoing efforts to delineate the regulatory boundaries of digital asset activities, particularly in the decentralized finance (DeFi) and staking spaces [1]. The guidance specifically addresses liquid staking tokens (LSTs), stating they should be treated as receipts rather than securities if they serve solely as proof of ownership without investment contract features [2].

According to the SEC’s Division of Corporation Finance, liquid staking involves users depositing “covered crypto assets” with a protocol or service provider in exchange for LSTs. These tokens represent proof of the user’s staked assets and associated rewards. The SEC explains that such tokens and their related activities do not automatically fall under securities laws if they operate as receipts and do not involve entrepreneurial or managerial efforts from the service provider [3]. Additionally, providers are not expected to guarantee staking rewards, a key factor in determining whether a token qualifies as a security under the Howey test [4].

The guidance also outlines that secondary market trading of compliant LSTs does not require registration under the stated conditions. However, the SEC warns that this clarity applies only to those operating within the outlined administrative framework. Any deviations—such as adding reward guarantees or additional services—could trigger regulatory scrutiny [5]. This is an important distinction as it underscores that the guidance is not a blanket exemption but rather a conditional framework.

The timing of this guidance is notable, as the crypto industry continues to navigate regulatory uncertainty. While the SEC aims to foster innovation, it simultaneously emphasizes the need for investor protection. By establishing clearer parameters for what constitutes a security in the context of liquid staking, the agency is helping to create a more predictable environment for market participants [6].

It is also worth noting that the guidance builds upon a May 2025 staff statement addressing other staking arrangements. That earlier guidance clarified that certain features, such as early withdrawals, slashing protection, or reward bundling, do not inherently convert staking into a securities offering. The latest clarification further refines the agency’s stance, focusing specifically on liquid staking structures [7].

Despite these clarifications, the SEC maintains that a fact-specific analysis is essential. Not all liquid staking models will qualify for the receipt classification, and projects must ensure their structures align with the outlined conditions to mitigate regulatory risks [8].

Source:

[1] US SEC Says Certain Liquid Staking Activities Fall Outside of Securities Laws (https://cointelegraph.com/news/sec-certain-liquid-staking-activities-securities-laws)

[2] SEC Clarifies Liquid Staking Isn't Security Under Protocol-Driven Structures (https://www.ainvest.com/news/sec-clarifies-liquid-staking-isn-security-protocol-driven-structures-2508/)

[3] Response to Staff Statement on Certain Liquid Staking Activities (https://www.sec.gov/newsroom/speeches-statements/crenshaw-statement-liquid-staking-080525)

[4] SEC Says Certain Liquid Staking Models Not Securities (https://news.bitcoin.com/sec-says-certain-liquid-staking-models-not-securities/)

[5] SEC Grants Clarity Liquid Staking Tokens Not All Securities (https://www.ainvest.com/news/sec-grants-clarity-liquid-staking-tokens-securities-2508/)

[6] US SEC Commissioner Slams Agency's Statement on Liquid Staking (https://cointelegraph.com/news/us-sec-commissioner-slams-liquid-staking-crenshaw)

[7] SEC Declares Some Liquid Staking Activities Are Not Securities in Key Crypto Guidance Update (https://coinpedia.org/news/sec-declares-some-liquid-staking-activities-are-not-securities-in-key-crypto-guidance-update/)

[8] SEC Clarifies Liquid Staking Tokens as Receipts Not Securities (https://www.ainvest.com/news/sec-clarifies-liquid-staking-tokens-receipts-securities-specific-conditions-2508/)