SEC Issues Nonbinding Liquid Staking Guidance Amid Industry Uncertainty

The U.S. Securities and Exchange Commission (SEC) has issued nonbinding guidance on liquid staking, a rapidly evolving segment of the cryptocurrency industry. The guidance, issued by a division within the agency, states that liquid staking and its associated tokens are not considered securities under current SEC rules [1]. However, the guidance has left significant regulatory uncertainty and is explicitly disclaimed as not representing the official position of the SEC. This has led to mixed reactions from industry participants, legal experts, and former officials.

The guidance emphasizes that liquid staking protocols—where users stake assets and receive receipt tokens—operate outside the scope of securities laws, provided they meet specific structural criteria [1]. However, the SEC staff made it clear that any deviation from these structures could trigger different regulatory treatment. This has raised concerns among industry stakeholders that the guidance may not fully account for the complexity and variety of liquid staking models, particularly those involving restaking, cross-chain operations, or more sophisticated financial products [1].

Scott Gralnick, head of institutional staking at Marinade, noted that the guidance is not binding and could be contested in the future [1]. He called for continued collaboration between industry participants and regulators to shape favorable outcomes, especially as related legislation is expected to be voted on soon. Lido Labs’ Chief Legal Officer, Sam Kim, similarly pointed out that while the guidance provides some clarity, it leaves unresolved questions around restaking and cross-chain staking [1].

One of the most vocal critics of the SEC’s approach has been Amanda Fischer, former Chief of Staff to SEC Chair Gary Gensler. Fischer likened liquid staking to rehypothecation practices that contributed to the 2008 financial crisis, warning that the reuse of synthetic tokens without clear oversight could introduce systemic risks [1]. She argued that by not classifying liquid staking tokens as securities, the SEC effectively removes them from its regulatory oversight, potentially leading to cascading failures if tokens fail or are compromised [1].

Fischer’s comments have drawn strong pushback from industry and legal experts. Austin Campbell of Zero Knowledge Consulting argued that regulators are applying traditional financial frameworks to decentralized systems, where leverage and risk structures differ significantly [1]. Matthew Sigel of VanEck highlighted what he described as a contradiction in Fischer’s position: praising the SEC’s blessing of crypto while simultaneously claiming it lacks oversight [1]. Legal analyst Kurt Watkins also noted that the inherent transparency and technical safeguards of blockchain distinguish liquid staking from traditional rehypothecation practices.

A key unresolved issue highlighted by the guidance is the taxation of staking rewards. The SEC did not provide clarity on whether these rewards are taxed at the time of receipt or when they are disposed of. Evan Weiss of Alluvial pointed out that this issue is currently under legal review and is a subject of congressional advocacy [1]. Another challenge involves grantor trust tax rules, which impact how staked assets are transferred after death and could hinder the integration of staking into exchange-traded funds [1].

The SEC’s nonbinding nature of the guidance means it can be contested and is not a formal rule or regulation. Caroline Crenshaw, a senior SEC official, emphasized this point, noting that the guidance does not represent a final policy position [1]. This has added to the uncertainty for market participants, who must now navigate a landscape where regulatory clarity remains incomplete.

As the debate continues, it is clear that the SEC’s approach to liquid staking has not resolved the underlying legal and structural complexities of the market. The guidance may influence judicial interpretations and market behavior in the future, but its long-term impact remains uncertain [1].

Source: [1] https://cryptorank.io/news/feed/9326b-gensler-chief-of-staff-criticizes-sec