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 in the cryptocurrency industry are not considered securities offerings. This move provides much-needed clarity for market participants and signals a more nuanced regulatory approach under SEC Chair Paul Atkins [1]. The guidance, released by the SEC’s Division of Corporation Finance, explains that liquid staking—where users stake digital assets and receive a receipt token in return—typically does not involve the offering of securities, provided the tokens function strictly as proof of ownership and not as investment contracts [2].

According to the SEC, liquid staking receipt tokens (LSTs) are administrative in nature, allowing users to access staking rewards while retaining flexibility in using their assets. The agency emphasizes that these tokens do not qualify as investment contracts under the Howey test, as providers of liquid staking services generally do not offer guarantees regarding staking rewards or engage in entrepreneurial activities [3]. This aligns with a prior staff statement in May 2025, which addressed various staking models and clarified that features like early withdrawals or slashing protection do not automatically trigger securities laws [5].

The SEC also noted that secondary trading of compliant LSTs does not require registration, but it warned that deviations from the outlined administrative framework—such as offering additional services or reward guarantees—could bring an activity under securities regulations [4]. This distinction reinforces the need for projects to align their structures with the guidance to mitigate regulatory risks.

The release of this guidance comes at a pivotal moment for the crypto industry, which has seen growing institutional interest in liquid staking strategies, particularly for Ethereum and Solana-based assets. Companies such as Jito Labs, VanEck, and Bitwise have actively lobbied the SEC to approve liquid staking strategies for exchange-traded funds (ETFs), with total value locked (TVL) in liquid staking reaching nearly $67 billion, according to DefiLlama [1]. This regulatory clarity could accelerate the approval process for innovative crypto products, including in-kind creation and redemption mechanisms for Bitcoin and Ether ETFs, which were recently approved [5].

At the same time, the SEC’s Project Crypto initiative reflects a broader effort to modernize digital asset regulation in the U.S. This initiative was launched in response to recommendations from the White House’s Digital Assets Working Group and aligns with recent legislative efforts such as the passage of the GENIUS Act, which focuses on stablecoin regulation [1]. Together, these developments suggest a regulatory environment that is evolving to support innovation while maintaining investor protections.

The guidance stops short of offering a universal exemption and reiterates that each case must be evaluated on its specific facts and circumstances. This fact-based approach allows for regulatory flexibility while setting a clear benchmark for compliant business models [6]. By distinguishing between administrative staking services and potentially regulated investment contracts, the SEC is helping to reduce legal uncertainty and fostering a more predictable environment for the digital asset industry [7].

Source:

[1] Securities and Exchange Commission Division of Corporation Finance Issues Staff Statement on Certain Liquid Staking Activities (https://www.sec.gov/newsroom/press-releases/2025-104-securities-exchange-commission-division-corporation-finance-issues-staff-statement-certain-liquid)

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

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

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

[5] 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/)

[6] SEC: Liquid Staking Receipt Tokens May Not Be Securities (https://cryptonews.com/news/sec-says-liquid-staking-and-receipt-tokens-may-not-be-securities-under-certain-structures/)

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