Crypto staking has become a pivotal part of the decentralized finance ecosystem, but the U.S. Securities and Exchange Commission (SEC) has yet to provide clear regulatory guidance on how these services should be treated under federal securities laws.
Nearly 30 advocacy groups, led by the Crypto Council for Innovation (CCI), are now calling on the SEC to establish clearer regulations that would support the responsible growth of crypto staking and ensure that innovation in the space continues without regulatory hindrances.
Crypto Staking Regulation
On April 30, 2025, the CCI’s Proof of Stake Alliance (POSA) submitted a formal letter to SEC Commissioner Hester Peirce, requesting clear regulatory guidance on crypto staking.
The letter emphasizes that crypto staking is a technical process and not an investment activity, arguing that it should not be regulated under traditional securities laws. This call for clarity responds to the SEC’s inquiry regarding the regulation of staking and liquid staking under federal securities laws.
The coalition highlighted the need for the SEC to avoid overly prescriptive rules that could limit innovation in the staking space. They requested that the SEC include staking features in exchange-traded products (ETPs) but stressed the importance of maintaining a balanced regulatory approach that fosters growth without stifling the industry.
The Case Against Classifying Staking as an Investment Contract
A core argument in the POSA’s letter is that crypto staking does not meet the SEC’s definition of an “investment contract,” which is outlined by the Howey Test. This test is used to determine whether an activity constitutes an investment and thus falls under securities regulations. The coalition explained that unlike traditional investment contracts, staking does not involve investors giving up control of their assets to an entity that seeks to make managerial decisions for profit.
The group emphasized that blockchain protocols, not a staking provider’s actions, determine the rewards. As a result, staking services are more technical in nature, with users retaining full ownership of their staked tokens. This distinction, the group argued, underscores the need for regulatory treatment that aligns with the technical and decentralized nature of crypto staking rather than treating it as a financial investment.
Staking’s Role in the Decentralized Internet
The POSA coalition underscored the importance of crypto staking as the backbone of the decentralized internet. Staking is integral to maintaining the security and operation of blockchain networks, particularly those using proof-of-stake (PoS) consensus mechanisms. By locking up tokens, stakers participate in validating transactions and securing the network, with rewards provided by the protocol for their efforts.
As decentralized finance continues to gain traction, staking has become a crucial tool for the maintenance and growth of blockchain ecosystems. The coalition stressed that staking should be recognized as a fundamental aspect of blockchain technology, not merely as a niche service.
SEC’s Approach to Crypto Staking and ETFs
While the SEC has yet to approve a crypto staking exchange-traded fund (ETF), it has delayed a decision on Grayscale’s spot Ether ETF, which proposed including staking features. In April 2025, the SEC postponed its decision on the Grayscale ETF, which would allow investors to gain exposure to Ether through staking.
Industry analysts, including Bloomberg ETF expert James Seyffart, have suggested that an Ether ETF with staking features could be approved as early as May 2025. However, the ongoing regulatory uncertainty has hindered the development of such products, leaving market participants awaiting more clarity.
Regulatory Challenges Faced by Staking Platforms
Crypto platforms offering crypto staking services have faced significant regulatory scrutiny in recent years. In March 2024, the SEC forced the exchange Kraken to halt its staking services for U.S. customers, accusing the platform of providing unregistered securities.
Kraken paid a $30 million settlement to resolve the charges, but the case raised concerns about how staking services are treated under U.S. securities laws.
Furthermore, the SEC has filed lawsuits against Ethereum service provider Consensys and staking platforms Lido and Rocket Pool. The regulator argues that liquid staking tokens offered by these platforms are classified as “investment contracts,” meaning they fall under securities regulations. These legal battles underscore the need for clear guidelines on how staking services should be regulated.
Industry Push for Principles-Based Guidance
The CCI and POSA are advocating for principles-based guidance from the SEC, similar to the approach taken for proof-of-work mining in the past. This type of guidance would allow stakeholder services to continue operating without being burdened by overly complex or restrictive rules.
The coalition believes that a collaborative approach between the SEC and the crypto industry will help create a regulatory framework that fosters innovation while ensuring compliance with the law.
The Role of Leading Crypto Firms in the Advocacy Effort
The POSA includes several high-profile organizations, such as venture capital firm Andreessen Horowitz (a16z), blockchain software firm Consensys, and the crypto exchange Kraken. These companies have a vested interest in ensuring that staking remains a viable and competitive offering in the crypto market, and they are actively supporting the push for clearer regulations.
Their involvement highlights the growing recognition of staking as a critical part of the crypto ecosystem. As more companies adopt staking, the need for a clear and balanced regulatory framework becomes more pressing.
Conclusion
As crypto staking continues to play an essential role in blockchain networks, the need for clear regulatory guidance from the SEC is becoming increasingly urgent. The CCI and POSA’s call for principles-based regulation aims to strike a balance between innovation and legal compliance, ensuring that staking can continue to thrive as a key component of the decentralized internet.
With continued dialogue between the SEC and industry leaders, there is hope that the regulatory uncertainty surrounding staking will soon be resolved, providing a clearer path forward for this vital sector of the cryptocurrency market.
Frequently Asked Questions (FAQ)
1. What is crypto staking?
Crypto staking is the process of locking up tokens to participate in blockchain network operations, with users earning rewards in return for helping to secure the network.
2. Why do crypto advocacy groups want regulatory clarity on staking?
These groups seek clear guidelines to support the responsible growth of staking services while avoiding overly restrictive regulations that could stifle innovation.
3. How is staking different from traditional investment activities?
Crypto Staking is a technical process governed by blockchain protocols, not by the decisions of a company. Users retain ownership of their assets, unlike traditional investment contracts.
4. What challenges have crypto staking platforms faced with the SEC?
Crypto platforms, including Kraken and Consensys, have faced regulatory action from the SEC, which has accused them of offering unregistered securities through staking services.
Appendix: Glossary of Key Terms
Crypto Staking: The process of locking up digital tokens to participate in blockchain network operations, with users earning rewards for validating transactions and securing the network.
Blockchain Protocols: The underlying rules and systems that govern the operation of a blockchain network, determining how transactions are validated and how rewards are distributed.
Proof of Stake (PoS): A consensus mechanism used by many blockchain networks where validators (or stakers) lock up tokens to participate in transaction validation and secure the network.
Investment Contract: A legal term used in securities law to describe an arrangement where an individual invests money in a common enterprise with an expectation of profits derived from the efforts of others.
SEC (Securities and Exchange Commission): The U.S. government agency responsible for regulating securities markets, including overseeing whether financial products, such as staking services, should be classified as securities.
Staking Services: Platforms that allow users to lock up their tokens to participate in staking, often providing tools to manage staking rewards and token security.
References
Cointelegraph – cointelegraph.com
Crypotpolitian – cryptopolitian.com
