SEC Determines that Liquid Staking Does Not Constitute a Securities Offering
The Securities and Exchange Commission (SEC) has provided much-needed clarity in the rapidly evolving crypto asset industry with its August 5, 2025, staff statement on liquid staking activities.
The statement, part of the SEC's wider "Project Crypto" program, defines parameters indicating that certain liquid staking activities do not constitute securities offerings under federal law.
Liquid staking is a function that allows users to stake crypto assets and receive tradable "staking receipt tokens." These tokens serve as proof of ownership and rewards entitlement.
According to the SEC, such liquid staking activities do not involve the offer and sale of securities within the meaning of the Securities Act of 1933 or the Securities Exchange Act of 1934. However, this classification does not apply if the deposited covered crypto assets are part of or subject to an investment contract under federal securities law.
Key activities excluded from securities offering treatment include holding the deposited covered crypto assets, issuing, minting, and redeeming of the liquid staking receipt tokens, facilitating staking and distributing staking rewards, managing potential slashing losses, and offering ancillary services related to these functions.
Consequently, liquid staking providers and participants do not need to register these transactions with the SEC or comply with securities disclosure requirements, assuming all conditions and circumstantial facts align with the staff statement.
Chairman Paul S. Atkins commended the release, stating it provides greater clarity on crypto asset activities outside of the SEC's jurisdiction. The transparency provided by the SEC's statement should promote additional innovation in the U.S. crypto space.
The SEC's action on liquid staking does not repeat earlier points about the nature of staking receipt tokens, the Howey Test, or the role of service providers in the staking process. Additionally, the statement does not address the implications of "Project Crypto" outside of the U.S. market or its potential impact on other areas of digital asset regulation.
The SEC's statement provides a significant milestone in the crypto asset industry, as it aims to promote clarity and understanding. It is crucial to note that the SEC states that protocols or service providers enabling liquid staking are not offering or selling securities, as long as they remain within defined parameters.
In summary, the SEC's Division delineates that liquid staking will avoid classification as securities offerings federally only if the tokens represent direct ownership of the staked assets and rewards without an underlying investment contract structure or securities characteristics. If the underlying assets or arrangements otherwise constitute investment contracts, securities laws would apply.
[1] SEC Division of Corporation Finance Staff Statement on Liquid Staking Activities, August 5, 2025. [2] SEC's "Project Crypto" Could Potentially Redefine Regulatory Landscape for Digital Assets in the U.S. Market. [3] SEC's Action on Liquid Staking Does Not Mandate Securities Registration for Compliant Staking Models. [4] SEC's Action on Liquid Staking Provides Clarification on the Regulatory Status of Liquid Staking in the Crypto Asset Market. [5] SEC's Statement on Liquid Staking Applies to Both Protocol-Based Providers and Third-Party Providers.
- The SEC's statement on liquid staking activities has clarified that certain decentralized finance (DeFi) activities, such as investing in liquid staking receipt tokens, do not constitute securities offerings, provided that the underlying assets and rewards do not have an investment contract structure or securities characteristics.
- The application of technology in finance, like liquid staking, has received a boost with the SEC's statement, as it exempts liquid staking providers and participants from registering transactions with the SEC and complying with securities disclosure requirements, given that all conditions and circumstantial facts align with the staff statement.
