The U.S. Securities and Exchange Commission (SEC) has issued a statement clarifying its position on certain liquid staking activities and associated tokens.
The statement has been touted as a positive step in the right direction for the SEC as it forged ahead with its goal of providing regulatory clarity for the crypto industry, particularly where DeFi platforms and liquid staking protocols are concerned.
The SEC’s stance on liquid staking
According to the agency, certain liquid staking activities and associated tokens, referred to as “Staking Receipt Tokens,” do not fall under securities offerings according to federal securities laws. As such, they do not require registration under the Securities Act of 1933 or the Securities Exchange Act of 1934.
The SEC defined liquid staking as the process of staking digital assets via a protocol in order to receive a “liquid staking receipt token,” which marks the token as the staker’s.
The SEC reached this decision by analyzing liquid staking activities and Staking Receipt Tokens under the Howey Test, which is supposed to determine whether a transaction qualifies as an “investment contract,” making it a security.
After the test, the SEC decided that Staking Receipt Tokens do not meet the “efforts of others” requirement under the test because the token’s value is directly tied to the underlying Covered Crypto Assets, rather than entrepreneurial or managerial efforts by the liquid staking provider or third parties.
The activities involved, which include minting, issuing, and redeeming Staking Receipt Tokens, are all considered administrative or ministerial, not investment-driven.
This clarification from the SEC is coming not long after Jito Labs joined VanEck and Bitwise to file a petition to approve liquid staking strategies for Solana (SOL)-based funds.
The SEC has adopted a pro-crypto stance, but it is still a divided house
The recent statement from the SEC regarding liquid staking is proof that it has moved away from its historical reactive stance and has taken a proactive one where crypto is concerned.
The SEC under Atkins has led a more engaging approach to digital asset regulation, breaking away from the agency’s former “ regulation by enforcement ” mandate under former Chair Gary Gensler.
It is that shift that has allowed the various clarifications regarding crypto that the SEC has put forward since Atkins took power.
Under his leadership, the SEC has also taken meaningful steps to ease regulatory burdens on cryptocurrency exchange-traded funds (ETFs). However, despite all these, the SEC’s camp is still described as divided, with one faction supporting the pro-crypto Atkins and the other aligned with Gensler’s suffocating mandate.
Even though he has resigned, his supporters within the SEC, such as Commissioner Caroline Crenshaw, back his rigorous enforcement, particularly in crypto lawsuits, describing them as a necessary tool to curb fraud and protect retail investors.
Crenshaw’s alignment with Gensler’s policies has made her a polarizing figure, with crypto advocates opposing her renomination and calling for her exit.
The liquid staking guidance highlights this divide, as Atkins’ leadership prioritizes innovation over enforcement while figures like Crenshaw have expressed dissent, stating that some staking services may still be securities based on prior court rulings.
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