SEC Declares Proof-of-Stake Staking Not a Securities Transaction, Ushering in New Era for Crypto Industry

The U.S. Securities and Exchange Commission’s Division of Corporation Finance has issued a landmark clarification stating that certain proof-of-stake (PoS) staking activities—including solo, self-custodial, and custodial staking—do not constitute securities transactions under federal law. The announcement, released on May 29, 2025, provides long-awaited regulatory clarity for blockchain networks such as Ethereum and Solana, and is widely viewed as a major boost for the broader PoS ecosystem.

According to the SEC’s statement, staking rewards are considered compensation for services provided by node operators to the network, rather than profits derived from the entrepreneurial or managerial efforts of others. The Division emphasized that participants in protocol staking activities retain ownership of their assets, and rewards are earned by following protocol rules—not through third-party management. As a result, these activities fall outside the scope of the Howey test, which is used to determine whether an arrangement qualifies as an investment contract subject to securities regulation.

The guidance applies to three primary staking models:

• Self-staking by node operators.
• Self-custodial staking through third parties.
• Custodial staking, where custodians act solely as agents on behalf of asset owners.

The SEC also clarified that ancillary services—such as slashing protection, early withdrawal options, alternative reward schedules, and pooling assets to meet minimum staking requirements—are classified as administrative or ministerial in nature, not entrepreneurial. These features do not alter the regulatory status of staking activities.

However, the SEC’s statement does not address more complex staking models like liquid staking or restaking, and it does not carry the force of law. Commissioner Caroline A. Crenshaw issued a dissent, warning that the guidance may misrepresent both legal and factual realities and could undermine investor protections.

The clarification is expected to foster innovation and adoption in the U.S. cryptocurrency sector, with industry groups and major players welcoming the move as a significant step toward regulatory certainty. In the wake of the announcement, platforms such as pStake Finance have experienced notable growth, with its $PSTAKE token surging over 400% in a month amid increased staking activity and a strategic shift toward Bitcoin liquid staking.

Industry observers note that while the new guidance marks a pivotal moment, the legal status of staking services may still depend on how they are structured and marketed, and further regulatory developments are anticipated as the crypto industry continues to evolve.