In May 2025, the U.S. Securities and Exchange Commission’s Division of Corporation Finance issued a public staff statement on “Certain Protocol Staking Activities,” offering the most formal acknowledgment to date that certain types crypto of staking on proof-of-stake (PoS) blockchain networks may fall outside the scope of U.S. federal securities laws.

Read the full statement here.

While the statement does not carry the force of a Commission rule or enforcement action, it provides helpful guideposts for blockchain developers, validators, custodians, and market participants involved in Protocol Staking arrangements.

Below, we summarize the key takeaways—and explain what the guidance does and does not cover.

What the SEC’s Protocol Staking Statement Covers

The SEC staff’s analysis applies to what it defines as “Protocol Staking”—a technical mechanism used by PoS networks to secure the network and validate transactions. Specifically, the guidance describes:

• Staking native cryptoassets (“Covered Crypto Assets”) in accordance with the consensus rules of a public, permissionless PoS blockchain;
  
• Rewards that are distributed automatically based on network-level protocol operations, rather than the managerial or entrepreneurial efforts of others;
  
• Arrangements where the staker retains economic ownership and has the ability to direct or withdraw assets (even if a third party is used for delegation or technical facilitation).

The staff explicitly includes self-staking, delegated staking (via smart contracts or validators), and certain custodial staking arrangements within the scope of the statement, provided the third party performs only administrative or ministerial tasks.

The central regulatory point is that such staking activities do not, in the staff’s view, satisfy the “efforts of others” prong of the Howey test for an investment contract. Instead, rewards flow from the protocol itself—and, in some cases, from the staker’s own activity (such as running a validator).

What Is Not Covered: Rehypothecation and Yield-Generating Staking

Importantly, the SEC’s guidance is narrow and does not extend to all staking or yield-bearing crypto products. For example, the statement does not apply to:

• Stablecoin staking programs or interest-bearing accounts where user funds are pooled, rehypothecated, or lent out to generate yield;
  
• Custodial staking services where the service provider actively selects which assets to stake, retains discretion over validator selection, or provides additional financial products;
  
• Restaking and cross-chain staking mechanisms, where the same staked assets are used to secure multiple protocols or layers.

These types of arrangements often involve managerial efforts by a third party, and thus present a higher risk of being classified as securities under the Howey test.

DAO Staking and Governance Participation

The staff statement does not address staking that occurs in the context of decentralized autonomous organizations (DAOs), where participants may stake governance tokens to gain voting rights or influence proposals. In many cases, any potential rewards associated with DAO participation stem from the participant’s own efforts—such as proposing changes, voting, or contributing to protocol operations.

If rewards are tied directly to governance activity, and the staking mechanism does not involve third-party managerial efforts, it is possible that such arrangements might fall within the same analytical framework as Protocol Staking. However, the SEC has not yet provided guidance specific to DAO staking, and any conclusions in this area remain speculative.

Emerging Guidance: Liquid Staking Statement 

On August 5, 2025, the SEC’s Division of Corporation Finance released a separate staff statement on certain liquid staking activities. That statement—the first to explicitly address liquid staking—clarifies that, depending on the facts:

• A depositor may receive a 1:1 liquid staking receipt token in exchange for staking,
  
• The provider performs only administrative or ministerial services (custody, token issuance, reward forwarding),
  
• And rewards still derive from network-level protocol staking, with no managerial discretion,

Such liquid staking arrangements, when structured to align with precise factual assumptions, are also not considered securities under federal securities laws.

As with the May 29 statement, the August 5 liquid staking guidance is non-binding, highly fact-specific, and limited in scope. If any assumptions do not hold—such as provider discretion, pooled assets, or use of receipt tokens to generate returns—then the Howey test analysis may differ.

Practical Considerations for Market Participants

The May and August 2025 staff statements are meaningful steps toward regulatory clarity, but they do not resolve all questions around staking and securities laws. Market participants should be aware of several limitations:

• The guidance is non-binding and reflects the views of staff in the Division of Corporation Finance—not the Commission as a whole;
  
• Applicability is highly fact‑specific and may depend on technical details, contractual rights, and the role of intermediaries;
  
• Even liquid staking guidance is narrow and assumes specific operational design and provider conduct;
  
• Liquid staking, although newly addressed, remains a variant of Protocol Staking and is treated separately from stablecoin-yield or restaking models.

Conclusion

The SEC’s May 2025 staff statement on Protocol Staking, along with its August 5 follow‑on covering liquid staking, signals that certain on‑chain staking models—when limited to protocol‑level consensus and administrative facilitation—may fall outside the scope of U.S. securities laws.

However, the scope of these statements is narrow. They do not apply to staking models that involve active third‑party discretion, pooled investments, rehypothecation, or yield generation mechanisms beyond pure protocol consensus. Nor do they yet provide clarity on DAO governance staking, which may or may not fit within the same analytical framework.

If your project involves any staking mechanisms—or use of governance or liquid staking tokens—we recommend a detailed Howey-based analysis and consultation with counsel experienced in digital asset regulatory compliance.

Our firm regularly advises token issuers, DAOs, exchanges, and custodians on SEC compliance, staking design, and crypto asset classification. Contact us here to schedule a consultation.