The SEC’s Division of Corporation Finance has clarified its views that liquid staking tokens are not securities.
The U.S. Securities and Exchange Commission (SEC) Division of Corporation Finance published a statement on Tuesday that certain liquid staking activities are not considered securities, paving the way for wider institutional adoption of staking and a clearer regulatory landscape for crypto.
The SEC Division clarified that, in its view, liquid staking tokens (LSTs), which it calls “Staking Receipt Tokens,” are not securities, meaning that liquid staking providers do not have to register with the SEC for any activities related to issuing LSTs or staking deposit crypto. The Division notes that its views apply as long as the underlying cryptocurrency isn’t considered a security.
“It is the Division’s view that participants in Liquid Staking Activities do not need to register with the Commission transactions under the Securities Act, or fall within one of the Securities Act’s exemptions from registration in connection with these Liquid Staking Activities,” the Division’s statement reads.
The Division specified that its statement only covers cryptocurrencies on public, permissionless proof-of-stake blockchains, which can be staked to participate in the network’s consensus mechanism.
Liquid staking refers to when crypto holders deposit their crypto assets with a third-party liquid staking provider and receive LSTs, which represent their staked crypto and can be redeemed for the deposited crypto, plus any staking rewards earned. LSTs and liquid staking protocols let holders earn staking rewards without locking their crypto up in staking contracts.
The Division specified that the statement does not cover restaking, and that it only represents the views of the Division staff, clarifying that “It is not a rule, regulation, guidance, or statement” of the SEC directly.
The Impact
Despite the fact that the statement is not official SEC guidance, experts were enthusiastic on the impact, especially for institutions looking to participate in staking.
“We’ve finally opened up the floodgates for institutional investors to easily participate in staking,” Brian Huang, co-founder of on-chain portfolio management platform Glider, told The Defiant, pointing out that lock-up periods and minimum deposits for direct staking, as opposed to liquid staking, “caused massive headaches for institutional investors and custodians.”
Liquid staking platforms collectively boast a total value locked (TVL) of over $68 billion — around 46% of the $145 billion locked in decentralized finance (DeFi) as a whole, according to DefiLlama. Lido, the largest liquid staking provider by TVL, makes up over $32 billion of that total.
Marcin Kazmierczak, co-founder of RedStone, called the SEC’s guidance a “watershed moment” for the crypto industry in comments shared with The Defiant.
“The distinction between protocol-driven staking and programs with managerial discretion provides much-needed regulatory certainty,” he explained.
“Liquid staking platforms on Ethereum and other chains have already attracted significant institutional capital, with TVL growing beyond pre-2022 levels. This clarity should accelerate institutional adoption, as firms can now confidently deploy capital without regulatory ambiguity.”
The majority of liquid staking is on Ethereum — TVL has surged from $20 billion in April to over $52 billion today, according to DefiLlama. “With regulatory clarity, we expect this growth trajectory to continue, particularly as roughly 13.78 million ETH is currently in liquid staking platforms, representing substantial room for expansion,” Kazmierczak said.
Lee Schneider, general counsel of Ava Labs, told The Defiant that the Division’s interpretation of liquid staking is “a correct and unsurprising application of the law,” adding:
“This analysis will apply beyond liquid staking tokens to things like wrapped tokens and tokenized off-chain assets. It will also likely show the way for taxation as well.”
Traditional Staking
The SEC Division of Corporation Finance’s latest guidance on liquid staking builds on a separate statement released in May, which clarified that protocol staking activities do not constitute a securities transaction. More specifically, that statement outlined the Division’s view that staking cryptocurrency to validate blockchain transactions does not count as a securities transaction.
“Uncertainty about regulatory views on staking discouraged Americans from doing so for fear of violating the securities laws,” SEC Commissioner Hester Peirce, leader of the agency’s new Crypto Task Force, said in a statement at the time. “This artificially constrained participation in network consensus and undermined the decentralization, censorship resistance, and credible neutrality of proof-of-stake blockchains.”
Jason Rozovsky, head of legal and policy at Interop Labs, developers of the Axelar network, said in comments shared with The Defiant that the SEC’s recent moves are “an important step forward,” not just for liquid staking tokens, but for composability, a “key ingredient of blockchain innovation.”
“These are not speculative instruments; they’re infrastructure,” he added. “By clarifying that such tokens don’t necessarily implicate the securities laws when they’re created through purely administrative functions, the SEC is enabling builders to focus on utility, not legal ambiguity.”
