The U.S. Securities and Exchange Commission (SEC) has given a nod of approval to liquid staking arrangements, declaring that they don’t breach securities law disclosure requirements. This announcement—issued on Tuesday via a staff statement from the Division of Corporation Finance—specifically addresses how participants and providers in liquid staking ecosystems can navigate regulatory waters without fear of legal backlash.
SEC’s Stance on Liquid Staking
Liquid staking, a burgeoning facet of the decentralized finance (DeFi) landscape, allows crypto enthusiasts to lock up tokens in proof-of-stake blockchains while maintaining liquidity through derivative tokens. These derivatives can be deployed across various DeFi platforms, offering users flexibility and potential returns. As of today, liquid staking commands a staggering $67 billion in total value locked (TVL) across all blockchains, with Lido leading the pack at $31.7 billion, according to DefiLlama.
The SEC’s recent declaration caused a slight uptick in tokens associated with liquid staking protocols such as Lido, Jito, and Rocket Pool. However, they remained subdued in daily trading, as evidenced by CoinGecko data. It’s worth noting that Tuesday’s statement is not an official regulation, but it provides clarity on the SEC’s perspective, suggesting that industry players adhering to this guidance won’t face litigation. This follows a broader trend in the SEC’s approach, as seen in SEC’s Atkins: ‘Most Crypto Assets Are Not Securities’ Under Bold New Vision.
Navigating the Regulatory Landscape
The SEC’s statement delves into the roles of liquid staking providers, including the intricacies of earning and distributing rewards, managing slashing events, and dealing with Staking Receipt Tokens. Interestingly, the SEC emphasized that liquid staking providers do not exert entrepreneurial or managerial efforts for depositors. They merely act as intermediaries, facilitating the staking process without dictating terms or decisions.
“This isn’t your typical investment contract scenario,” remarked crypto analyst Jamie Wu. “The SEC seems to recognize that liquid staking operates more like a service rather than a managerial endeavor.”
Notably, the SEC had previously issued guidance on other staking forms, but the latest statement is a step toward acknowledging the distinct parameters of liquid staking. These guidelines reassure stakeholders that, provided they follow the outlined provisions, they should remain in the clear from legal entanglements. This development aligns with the SEC’s recent acknowledgment of BlackRock’s Staking Request for Ethereum ETF, indicating a more open stance towards staking innovations.
The Bigger Picture
In recent years, the regulatory environment around cryptocurrencies has been a labyrinth, with market participants often caught in a web of uncertainty. The SEC’s evolving stance on liquid staking is seen as a positive signal, indicating a potential shift towards more nuanced regulatory frameworks. Yet, the statement leaves open questions about how these guidelines might evolve or be challenged in the future.
As for the market, the broader implications are still unfolding. While the SEC’s nod may bring temporary relief to stakeholders, it also underscores the need for ongoing dialogue between regulators and the crypto community. The upcoming crypto policy conversation in Washington, D.C., on September 10, promises to be a crucible for these discussions.
With liquid staking gaining traction, the SEC’s position could very well lay the groundwork for how other DeFi innovations are viewed through a regulatory lens. However, as crypto enthusiasts know all too well, markets can be capricious, and today’s clarity might not be tomorrow’s certainty.
In this ever-evolving ecosystem, industry players are urged to stay informed and agile, ready to adapt to whatever regulatory changes might lie ahead. The SEC’s statement is a step in the right direction, but as the crypto world continues to spin, only time will tell how these regulatory winds will shift.
Source
This article is based on: SEC Says Liquid Staking Doesn’t Run Afoul of Securities Laws
Further Reading
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
