SEC Commissioner Crenshaw Challenges Liquid Staking Guidance Foundation

SEC Commissioner Caroline Crenshaw has issued a strong critique of the SEC’s Division of Corporation Finance’s recent statement on liquid staking, questioning its factual and legal foundations. In a statement dated August 5, 2025, Crenshaw described the guidance as a “wobbly wall of facts without an anchor in industry reality,” arguing that the assumptions underpinning the statement are not sufficiently supported and that its legal analysis is overly limited [1]. She emphasized that the statement represents the views of the division’s staff, not the full Commission, and warned that it should not be relied on by entities in the liquid staking space as a definitive regulatory safe harbor [2].

The Division of Corporation Finance’s statement had sought to clarify that certain liquid staking activities—where users lock up crypto assets to earn rewards and receive tokens representing those stakes—do not constitute securities under federal law. The guidance was intended to bring clarity to the regulatory landscape, especially for projects in the decentralized finance (DeFi) sector [1]. However, Crenshaw’s pushback highlights the ongoing internal disagreement at the SEC over how to classify and regulate these activities.

Crenshaw’s criticism is not isolated. In May 2025, she had already raised concerns about a prior statement from the agency’s staff on protocol staking, cautioning against the risks of relying on assumptions not grounded in real-world operations [3]. Her continued skepticism signals a broader concern that the SEC’s current approach to crypto regulation could mislead market participants or fail to account for the complexities of the industry [2].

In contrast, SEC Chair Paul Atkins publicly endorsed the Division of Corporation Finance’s position. In a statement also released on August 5, 2025, Atkins described the guidance as a “significant step forward” in the agency’s efforts to provide clarity on the application of securities laws to emerging technologies [1]. He linked the statement to the broader goals of the SEC’s Project Crypto initiative, which aims to adapt regulatory frameworks to the evolving financial landscape [1]. This divergence in perspective between Crenshaw and the Chair underscores the agency’s struggle to balance innovation with investor protection.

Crenshaw’s comments also point to a deeper issue regarding the regulatory utility of the guidance. She noted that the statement might not be widely adopted by enforcement divisions or courts, which could limit its practical impact [1]. Her assertion that “some things are better left unsaid” suggests that she believes the statement risks creating a false sense of certainty rather than a clear regulatory framework [2].

Industry observers have responded to the guidance with a mix of optimism and caution. Some view the statement as a positive step for DeFi and institutional adoption of liquid staking products. Others, however, agree with Crenshaw’s assessment, warning that the guidance may not hold up under legal scrutiny or be applied consistently in enforcement actions [4]. As the SEC continues to navigate these debates internally, the broader crypto market remains on edge, watching how the agency will ultimately shape its approach to digital assets.

Source:

[1] https://news.bitcoin.com/sec-commissioner-crenshaw-rebuffs-statement-on-liquid-staking/

[2] https://cryptonews.com/news/sec-commissioner-caroline-pushes-back-on-liquid-staking-statement/

[3] https://davidlopezkurtz.substack.com/p/liquid-staking-isnt-a-securities

[4] https://cointelegraph.com/news/sec-liquid-staking-tokens-win-defi-institutions