On May 29, 2025, the Securities and Exchange Commission’s Division of Corporation Finance (“Corp Fin”) issued a Statement on Certain Protocol Staking Activities. The staff-level guidance addresses the staking of “Covered Crypto Assets” (described below) on networks that use proof-of-stake (“PoS”) as a consensus mechanism and opines, contrary to the SEC’s previous positions upheld by several courts, that certain crypto staking activities are not securities offerings subject to registration under the federal securities laws.
While providing some comfort to entities that wish to engage in or offer staking services that the SEC will not bring charges related to a failure to register the staking offerings with the SEC, the staff guidance is technical, narrow in scope, lacks the effect of law, and will not insulate staking services from private securities-law claims. Accordingly, market participants should consult with counsel to closely evaluate the Corp Fin guidance to manage the risks presented by their staking activities.
Background on Staking
While the mechanics of staking vary among networks, at a high level, PoS networks allow crypto asset holders to “stake” their assets as part of the consensus validation process underlying the recording of transactions on the network. Typically, crypto holders stake their crypto assets using a smart contract, which has the effect of locking the assets for a period of time determined by the network protocol. Crypto holders are economically rewarded for staking under the PoS protocol by either newly minted tokens or a percentage of transaction fees paid by parties using the network.
The New Guidance
The Corp Fin guidance only applies to the staking of Covered Crypto Assets, which are those crypto assets “that do not have intrinsic economic properties or rights, such as generating a passive yield or conveying rights to future income, profits, or assets of a business enterprise.” And the guidance only addresses the following forms of staking:
- “Self Staking” – in which crypto holders directly stake their Covered Crypto Assets while retaining ownership and control of them
- “Self-Custodial Staking Directly with a Third Party” – in which crypto holders directly stake their Covered Crypto Assets to third parties that maintain validation “nodes” while retaining ownership and control of them
- “Custodial Arrangements” – in which crypto holders transfer custody of their Covered Crypto Assets to a third party that facilitates the staking of them on behalf of the owner
In the new guidance, Corp Fin takes the position that aspects of each of the above forms of staking do not satisfy the test articulated in SEC v. W.J. Howey Co., 328 U.S. 293 (1946), for determining whether an offering is an “investment contract” that is a “security” under federal law. With respect to Self Staking, Corp Fin states that there is no expectation of profits from the “entrepreneurial” or “managerial” efforts of others (a requirement under Howey) because the act of staking to establish a validation node is “merely . . . an administrative or ministerial activity to secure the PoS network and facilitate its operation.” With respect to Self-Custodial Staking Directly with a Third Party, Corp Fin opines that the third party’s services in maintaining a validation node is administrative or ministerial for the same reasons as Self Staking.
Finally, as to Custodial Arrangements, Corp Fin states that, despite taking custody of the crypto assets, the custodial service provider “does not decide whether, when, or how much” of the token holder’s assets to stake. Accordingly, it is merely acting as an “agent” to stake the assets on behalf of the owner—provided that the only discretion it exercises is the selection of the validation node to which to stake the assets.
The Corp Fin guidance also takes the position that providing certain “Ancillary Services” to token holders is administrative in nature, specifically identifying the following activities as permissible: providing slashing coverage, early unbonding, and alternate rewards and payment schedules, as well as allowing the aggregation of crypto assets to meet a minimum amount required for staking.
The SEC previously charged a number of staking services for engaging in the unregistered offering of a security, under the theory that their staking offerings were investment contracts under SEC v. W.J. Howey Co., 328 U.S. 293 (1946). Courts, including in the SEC’s action against Binance Holdings Limited (see pages 54-56), accepted the SEC’s theory that such staking offerings were investment contracts. Nevertheless, the SEC dismissed the Binance action on May 29, 2025, despite fraud allegations against two Binance-related entities, BAM Trading Services, Inc. and BAM Management US Holdings, Inc.
Gaps and Risks in the New Guidance
Legal Effect. As reflected in the Corp Fin statement, staff-level guidance “is not a rule, regulation, guidance, or statement” of the Commission, and therefore “has no legal force or effect; it does not alter or amend applicable law[.]” Absent SEC rulemaking, legislation, or other legally binding developments, a future Commission could take a contrary view to the Corp Fin guidance, or Corp Fin itself could withdraw its guidance.
Accordingly, a court analyzing whether a certain staking offering constitutes an “investment contract” under Howey will continue to look to that case and existing law to determine whether a particular staking offering is a security. Courts, such as the district court in the SEC action against Binance, have held that offering staking services may constitute the offering of a security.
Limited Scope. The guidance contains two limitations that substantially affect its reach. First, it only applies to the staking of Covered Crypto Assets, and not all crypto assets will qualify—for example, those that generate a passive yield. Second, as to Custodial Arrangements, any exercise of discretion by the custodial service provider other than the selection of the node to which the assets are staked may constitute “managerial efforts” under Howey. The guidance specifically notes that the custodian may not decide whether, when, or how much of the token holder’s Covered Crypto Assets to stake. Accordingly, services that pool token holders’ assets prior to staking in a manner that results in partial staking of customers’ assets at the custodian’s discretion may be engaging in activity that is “managerial” for purposes of the Howey test.
Private Plaintiffs. Given the limitations above, there is ample room for private plaintiffs to allege that staking services (or even a network’s staking protocol itself) constitute the offering of an investment contract. The Corp Fin guidance does not address all of the arguments that a PoS network, by offering staking for a reward, is engaged in a securities offering, or that staking service providers may be providing managerial efforts. Corp Fin’s reasoning that the staking itself is merely “administrative” because it secures the network and “facilitates its operation” leaves open the issue of whether facilitating the operation of a network is “entrepreneurial” in certain circumstances. For example, a staking service provider may be so closely tied to the operation of the underlying network that it undermines Corp Fin’s assumption that the staking service is merely “administrative” in nature.
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