On May 29, 2025, the staff of the SEC's Division of Corporation Finance (the "Staff") issued a statement concluding that certain proof-of-stake blockchain "staking" activities do not involve the offer or sale of "securities" within the meaning of the Securities Act of 1933 or the Securities Exchange Act of 1934.
In other words, the SEC Staff's view is that participating in proof-of-stake ("PoS") network consensus—whether by solo staking or through third-party staking services—does not amount to an investment contract under the Howey test requiring Securities Act registration.
This marks a significant clarification for the crypto industry, closely following the Staff's recent guidance on meme coins, USD-backed stablecoins, and crypto mining.
Notably, two SEC Commissioners publicly reacted: Commissioner Hester Peirce concurred with the Staff's analysis, while Commissioner Caroline Crenshaw dissented, reflecting a divide over the future regulatory approach and highlighting ongoing legal risk despite the Staff's position.
Covered Staking Models and the "Efforts of Others" Prong
The Staff grounded its analysis in the Howey test, focusing on the last prong—profit derived from the efforts of others. Because crypto tokens used in PoS staking are not traditional securities (like stocks or notes), the critical question was whether various staking arrangements constitute an "investment of money in a common enterprise with an expectation of profits to be derived from the entrepreneurial or managerial efforts of others." The Staff's answer is no: in its view, protocol staking lacks any essential entrepreneurial or managerial effort by a promoter or third party, as the potential profits (staking rewards) come from the automated operation of the network and the participant's own actions. The Staff emphasized that routine administrative or ministerial activities performed in staking do not equate to the kind of managerial efforts that the Howey test target.
The statement delineates three types of protocol staking models it covers, ensuring clarity on how each one avoids reliance on others' managerial efforts:
Self (or Solo) Staking: A token holder (node operator) stakes the crypto assets it owns and controls, using its own hardware/software resources to validate blocks and secure the network. The staker retains full control of the private keys and tokens throughout. According to the Staff, a solo staker's reward is earned through its own operation of the node in compliance with protocol rules, which is a purely technical and ministerial activity rather than an investment in someone else's venture. Any expectation of profit comes from the protocol's predetermined reward mechanism and the staker's personal effort/resources, not from the "entrepreneurial or managerial efforts of others." In short, the solo staker is providing a service to the network and receiving compensation (block rewards) for that service, analogous to earning a fee, rather than relying on a promoter to generate profits.
Delegated (Self-Custodial) Staking via Third-Party: A token holder can also participate without running its own node by delegating validation rights to a third-party node operator (sometimes called a validator or staking-as-a-service provider) while retaining ownership/control of the tokens (the holder's assets stay in its wallet). The node operator performs the technical validation work and takes a fee from the protocol rewards, forwarding the remainder to the token owner. The Staff views this arrangement as functionally similar to solo staking for Howey purposes, provided that the token holder retains control over the assets, and the third party's role is limited to technical validation without discretionary authority. No investment contract is formed because the node operator's efforts are limited to routine validation services, which the Staff characterizes as administrative/ministerial support, not the kind of managerial effort that drives an enterprise's success. Critically, the token owner's profits are not "derived from" the node operator's entrepreneurial actions—the operator does not promise any profit beyond the protocol's standard rewards and does not guarantee success, acting merely as a technical agent. The Staff explicitly notes that whether a node operator stakes its own tokens or those of others "does not alter the nature" of the staking activity under Howey, since in either case rewards flow from the protocol's operation and rules, not from the node operator innovating or managing a separate business on the user's behalf.
Custodial Staking (Through a Custodian Service): In a custodial staking arrangement, a token holder deposits its crypto assets with a third-party platform or custodian (i.e., an exchange), which then stakes the assets on the holder's behalf. The custodian holds the tokens in a controlled wallet and either runs its own node or delegates to a validator it selects. Importantly, the Staff's analysis assumes the customer remains the beneficial owner of the staked tokens at all times, even though the custodian has possession. The Staff lays out strict conditions to ensure the custodian is acting purely as a service provider: the custodied assets must not be used for any other purpose—they are not to be lent out, commingled, rehypothecated, or deployed in trading or business operations, and they must be held so as to be insulated from the custodian's creditors. The custodian's role is limited to facilitating the staking per the protocol's parameters and perhaps choosing a reliable node operator—and "this selection is the Custodian's only decision in the staking process." The Staff concludes that such custodial staking does not involve others' entrepreneurial efforts: the custodian is not exercising discretionary management over the assets in a way that generates independent profit, but rather "simply is acting as an agent" to carry out the protocol staking on the user's behalf. The statement emphasizes that the custodian does not decide whether, when, or how much to stake—those parameters are set by the protocol or the customer's instructions—and that performing custody and staking setup is an administrative function not sufficient to satisfy Howey's "efforts of others" prong. As with delegated staking, the custodian does not guarantee any specific return and only deducts a preset fee from the protocol-derived rewards. In essence, so long as the custodian confines itself to this narrow, pass-through role (and adheres to safeguards like not misusing customer assets), the staking program is not a securities offering in the Staff's view.
Across all three models, the Staff's common theme is that staking rewards are earned through the operation of an automated blockchain protocol plus the user's own token commitment, without a separate business venture in which others' managerial efforts drive the profits. The statement underscores that participants in these "Protocol Staking Activities" need not register transactions under the Securities Act or find an exemption, since no investment contract is present. However, the scope of this relief is carefully defined by the fact patterns above—activities falling outside these models (or tokens with additional profit-bearing features) are not within the Staff's view.
Ancillary Features: Pooling, Insurance, and Other Services
Modern staking-as-a-service programs often bundle additional features to attract users. The Staff addressed several such ancillary services and found that, if kept within certain limits, they do not transform the staking arrangement into a securities offering. In the Staff's analysis, these features are "merely administrative or ministerial in nature"—extensions of the core staking service—and do not involve the sort of entrepreneurial judgment or risk-taking that would satisfy Howey's third-party efforts prong. However, as discussed in Commissioner Crenshaw's dissent below, these same features may be viewed by courts as evidence of managerial efforts, particularly when marketed as mechanisms to increase returns or reduce risk.
The Staff specifically discusses: (1) Slashing insurance ("slashing coverage") to indemnify users against losses if a validator misbehaves, (2) Early unstaking or "unbonding" services that let users withdraw staked assets before the protocol's lock-up period ends, (3) Flexible reward payouts (where a provider advances or delays reward distributions on a different schedule or in different amounts than the protocol, without increasing the total yield), and (4) Pooling/Aggregation of multiple users' tokens to meet minimum staking thresholds.
The Staff notes that pooling simply helps users participate in the validation process (an essential feature on networks with high minimum stake requirements) and is part of the technical operation of staking, not a separate profit scheme. Similarly, offering slashing protection or liquidity (early unbonding) is likened to commonplace customer service features that reduce risk or inconvenience, but do not generate new profit opportunities beyond the protocol's standard rewards. Crucially, any adjusted reward schedules must not involve guaranteeing returns or paying more than the protocol would—the provider can advance or bundle payouts for convenience but cannot promise a higher or fixed yield independent of what the network yields. So long as these features are marketed as optional conveniences or safeguards (and adhere to the protocol-determined economics), the Staff views them as ancillary support that does not make providing staking services a securities offering.
Limits and Exclusions
The statement includes important caveats that cabin its scope. It does not address variations like "liquid staking" or "restaking" protocols, where staked positions are tokenized or reused in other DeFi activities. It also excludes any scenario where a service provider goes beyond ministerial functions—for instance, if a provider were to decide "whether, when, or how much" of a customer's assets to stake, or actively manage staking strategies for profit, those situations fall outside the Staff's guidance and could well be investment contracts. The Staff's position is deliberately narrow, covering only the described activities and services. Furthermore, as with other recent Staff statements, this guidance is informal and non-binding: it represents the Staff's views only and "has no legal force or effect," nor does it alter or create law. In practice, this means that while the Staff would not recommend enforcement against pure protocol staking as outlined, courts or the Commission could reach a different conclusion. The Staff itself acknowledges that its conclusions are limited to tokens with no intrinsic payment or profit rights (i.e., tokens whose sole return comes from network participation). Staking arrangements involving additional financial promises, or tokens that confer equity-like rights, remain subject to the full scope of securities law analysis.
Commissioner Crenshaw's Dissent
Commissioner Crenshaw issued a sharp dissent warning that the Staff's position conflicts with established law and could mislead stakeholders. She argued that the Staff's analysis "does not square with the court decisions on staking and the longstanding Howey precedent on which they are based." Specifically, Commissioner Crenshaw noted that in prior SEC enforcement actions against staking programs, multiple federal courts found the SEC's allegations legally sufficient that such programs were investment contracts—essentially upholding the view that staking services as offered could meet Howey's criteria. She referenced, for example, recent cases where courts accepted that staking-as-a-service schemes pooled users' crypto and promised to do the technical work to earn rewards, which the SEC alleged constituted a security offering. Commissioner Crenshaw emphasized two features often present in staking services that, in her view, entail the "entrepreneurial... efforts" of a promoter: pooling of assets and managerial service to enhance profits. She pointed out that pooling customers' tokens can increase the chances of earning rewards (i.e., by meeting high minimum-stake requirements and achieving more consistent validator selection)—a benefit users could not as readily obtain on their own—thereby creating an expectation of improved profits from the service provider's efforts. Likewise, staking firms often deploy complex technical infrastructure and expertise beyond a typical token holder's capability, effectively inviting "investors who lacked the technical acumen and hardware" to rely on the provider to secure rewards for them. In Crenshaw's opinion, when a business builds an enterprise on top of a blockchain protocol—even if the underlying activity (staking) is technical—it may be packaging that activity as an investment opportunity. She analogized this to the famous Gary Plastic case, where ordinary bank CDs (not securities in themselves) were bundled by a broker into a program with extra features and marketing, leading the court to find an investment contract existed.
Crenshaw took issue with the Staff downplaying exactly those profit-oriented features. The Staff, for instance, treats pooling, slashing protection, and early withdrawals as "ancillary" and merely convenience services. Crenshaw countered that courts have deemed features that "protect against losses" or "increase liquidity" as hallmarks of a manager's effort to enhance an investment's value. By labeling these features as non-managerial, the Staff, in her view, is glossing over economic realities. More broadly, she criticized the statement for failing to give a usable test: "this statement fails to deliver a reliable roadmap" for distinguishing when a staking program is a security or not. Key terms are left undefined—for example, the Staff excludes services that determine whether/when/how to stake assets from the no-security conclusion but does not clarify what amount of discretion or strategy triggers that line. This could encompass many real-world services (such as those that auto-compound rewards or optimize staking timing), yet the statement offers no further guidance. Finally, Crenshaw raised investor protection concerns. She noted that the Staff refers to third-party staking intermediaries as "Custodians" and asserts that users retain ownership of their tokens at all times during staking. In securities law, terms like "custodian" come with robust fiduciary duties and segregation requirements for customer assets. Here, however, staking customers do not enjoy equivalent protections, since the providers are not regulated brokers or custodians if the activities are outside SEC jurisdiction. Crenshaw warned that customers might be lulled into a false sense of security by contract language suggesting their assets are safe in all events, when in reality, if a staking service fails or is hacked (or goes bankrupt), there is no federal investor safety net. In sum, her dissenting view is a caution that the Staff's permissive stance could be premature: by anticipating future changes in the law and effectively "fak[ing] it till we make it," the SEC might be undermining clarity and exposing investors to harm. She urges that instead of informal staff carve-outs, the Commission should engage in formal rulemaking or clearer guidance grounded in existing precedent—implying that until then, companies and token holders cannot fully rely on staff statements as a defense.
Practical Implications for Stakeholders
Blockchain Developers & Token Issuers: The Staff's statement offers clearer guidance for structuring proof-of-stake networks without triggering securities registration. If staking is limited to protocol-defined rewards earned through user actions, without profit-sharing, dividends, or managerial promises, it's less likely to be treated as an investment contract. Teams should ensure staking mechanisms are transparent, rule-based, and decentralized. While this lowers legal risk, caution remains warranted: the Staff's view is not a formal safe harbor, and token pre-sales, liquid staking, or yield guarantees may still implicate securities laws. Market participants should integrate the Staff's criteria into token design, white papers, and staking infrastructure.
Validators & Node Operators: The Staff's position supports the view that running a node and earning staking rewards is compliant, so long as operators stick to protocol-level services and avoid discretionary asset management or profit guarantees. This offers relief to solo validators and staking pools concerned about being treated as unregistered securities intermediaries. Operators should clearly document that they act as infrastructure providers, not fiduciaries, and limit ancillary services (e.g., slashing insurance) to avoid triggering Howey. While this may spur growth in the validator space, operators must still monitor state-level rules and tax exposure, which fall outside the SEC's scope.
Staking Service Providers (Exchanges and Platforms): The Staff's guidance offers meaningful regulatory clarity for platforms offering staking-as-a-service, signaling that properly structured programs are not securities offerings. To stay compliant, providers must ensure customer assets remain segregated and are not used for lending, trading, or yield schemes. The provider's role should be limited to executing on-chain staking per customer instruction, with no ROI promises beyond protocol rewards. User agreements and marketing should reflect this framing. Ancillary features, like slashing insurance or early unstaking, are permitted if they don't introduce managerial discretion. Still, Commissioner Crenshaw's dissent warns that anything beyond "bare-bones" staking, i.e., pooled asset management, may invite scrutiny. Providers must also stay alert to non-SEC regimes like commodities or consumer protection laws and maintain strong compliance protocols.
Token Holders (Staking Participants): The Staff's statement offers comfort that staking—directly or through a service—won't, on its own, violate securities laws, at least for the staking models it outlines. This could encourage broader U.S. participation and help support network decentralization. Still, not all staking programs are compliant. Token holders should be cautious of offerings with fixed returns or bundled financial products, which may carry greater legal risk. As Crenshaw notes, staking via a provider lacks the safeguards of regulated brokerages, so users should scrutinize terms on custody, slashing risk, and asset use. Sticking to services that follow the Staff's best practices (e.g., segregation, no rehypothecation, protocol-driven rewards) is safer. The regulatory landscape remains fluid, so token holders and counsel should monitor for future shifts that could affect more complex staking models.
Key Takeaways
The SEC Staff's May 2025 statement represents a meaningful, though narrowly framed, step forward in clarifying how federal securities laws apply to proof-of-stake blockchain networks. By signaling that common forms of staking (solo, delegated, and custodial) do not, in and of themselves, constitute securities offerings under the Howey test, the Staff has provided welcome guidance for developers, validators, platforms, and token holders alike. When staking is structured to reflect protocol-driven participation and not managerial profit-generation, it can fall outside the scope of U.S. securities regulation.
However, this guidance is non-binding, fact-specific, and not a safe harbor. It does not preclude future enforcement actions or adverse court interpretations, particularly as staking models grow more complex (i.e., liquid staking, restaking, or auto-compounding rewards). The dissenting views from within the Commission underscore the fragility of consensus and the risk of regulatory reversal.
For now, stakeholders should treat the Staff's position as a useful yet provisional blueprint. Careful attention to control, discretion, disclosures, and reward mechanics will remain essential.
As the legal and technological terrain evolves, thoughtful structuring, clear documentation, and continuous dialogue with legal counsel will be key to navigating staking's shifting regulatory perimeter.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
