SEC Decides Staking Is Not (Always) A Securities Offering After All

On May 29, 2025, the Division of Corporation Finance of the U.S. Securities and Exchange Commission (SEC) issued a statement (Staking Statement) clarifying that certain staking activities do not constitute securities offerings and are exempt from registration under the federal securities laws.^[1]

Perhaps the most noteworthy takeaway from the Staking Statement is that custodial staking arrangements generally do not constitute securities offerings even when accompanied by certain ancillary services because the custodian acts in an administrative or ministerial capacity and merely provides a service to the owner as its agent. This position provides another instance of long-awaited regulatory clarity for the industry, which has operated under a cloud of uncertainty particularly in light of enforcement actions previously brought by the Commission against industry participants alleging that staking activities fall within the parameters of the definition of “security” under the federal securities laws.

The regulatory clarity on staking from a securities perspective may also open doors for the SEC’s approval of staking exchange-traded funds (ETFs) and for the Office of the Comptroller of the Currency (OCC) to formally open staking to U.S. banking institutions.

What Is Protocol Staking?

Staking is critical to the proper functioning of a proof-of-stake (PoS) blockchain network. As part of the network’s PoS consensus mechanism—which enables peer-to-peer transactions without the need for a trusted third-party intermediary—operators of nodes (computers) “stake” (commit) the network’s native digital assets (e.g., ETH on the Ethereum blockchain), and in turn may be selected as “validators” who are responsible to update the state of the network to include new transactions, and receive rewards as compensation for their efforts.

The Staking Statement describes three types of “protocol staking”:

1. A node operator self-staking their own native digital asset;
2. A holder of the native digital asset granting their validation right to a third-party node operator while continuing to maintain complete custody of the digital asset (i.e., self-custodial staking); and
3. A holder of the native digital asset transferring control of the digital asset to a third-party custodian.

SEC Affirms Staking Arrangements Are Not Securities Offerings Under Specific Circumstances

The Staking Statement is applicable to persons who self-stake certain crypto assets, as well as non-custodial and custodial staking-as-a-service providers that facilitate this type of staking on behalf of others. Additionally, the Staking Statement explains that the pairing of certain ancillary services together with non-custodial or custodial staking services, does not make the provision of staking services a securities offering.

Industry participants will undoubtedly focus on the Staking Statement’s clarification that custodial arrangements do not constitute investment contracts under Howey. The key interpretive shift that underpins the Staff’s position on this issue is that custodial staking arrangements with “Service Providers” (a term defined in the Staking Statement to include node operators, validators, custodians, delegates and nominators) does not involve the entrepreneurial efforts of those Service Providers who merely act as the owners’ agents. The Staking Statement focuses on three key aspects of the custodial staking arrangements.

First, legal title to (and ownership of) the asset being staked remains with the owner. This can be accomplished through the user agreement or terms of service by including provisions specifying that the owner retains ownership of the assets.

Second, the role of the Service Provider must be “merely administrative or ministerial in nature.”  In a subtle but important shift from legal theories underlying SEC enforcement actions against staking arrangements in 2023, the Staking Statement confirms that custodial arrangements do not constitute investment contracts because the custodian (whether a node operator or not) does not provide entrepreneurial or managerial efforts to the owners but is merely acting as their agents. The Staking Statement notes that the Service Provider must not decide whether, when, or how much of an owner’s Covered Crypto Assets to stake. Mere custody of the assets and, in some cases selecting a node operator, is not sufficient to satisfy Howey’s “efforts of others” requirement because these activities are administrative or ministerial in nature and do not involve managerial or entrepreneurial efforts.

Third, and perhaps most critical for firms seeking to design staking programs that are exempt from registration, the Service Provider must not “guarantee or otherwise set or fix the amount of the rewards” owed to the owners of the staked assets. The Staking Statement affords the Service Provider some flexibility and expressly authorizes the Service Provider to “subtract from [the reward] amount its fees (whether fixed or a percentage of such amount)” and to “deliver earned rewards at a cadence and in an amount that differs from the protocol’s set schedule and/or where the rewards are paid earlier or less frequently than the protocol awards them” without turning the arrangement into a securities offering. 

The third point may warrant further clarification through discussions with the SEC Staff. On its face, the Staking Statement does not expressly state that structuring a staking arrangement with fixed reward rate automatically renders the arrangement a securities offering. That said, the Staking Statement also does not foreclose that possibility.    

Service Providers May Offer Critical Ancillary Services Without Converting the Arrangement into an Investment Contract

The most significant industry-wide implication of the Staking Statement is its clarification that offering certain ancillary services—whether in conjunction with custodial or non-custodial staking services—does not alter the underlying regulatory analysis. These ancillary services include the provision of slashing coverage, allowing crypto assets to be returned to a staker prior to the end of the protocol’s “unbonding” period, delivering earned rewards based on an alternative rewards payment schedule and in alternative amounts, and aggregating stakers’ crypto assets together for purposes of satisfying a network’s minimum staking requirements. The majority of these services have long been the subject of legal debate as to whether they would cross the line into “efforts of others” under Howey and the Staking Statement opens the door to the provision of these critical services to stakers without the fear of invoking the SEC’s ire.

Another Implicit Repudiation of the Gensler-Era Approach

The Staking Statement is the latest in a fast-developing line of SEC statements providing long-sought regulatory clarity on how federal securities laws apply to digital asset-related activities.  As we have covered in many other blog posts on digital asset-related topics, the SEC under former Chair Gensler repeatedly declined requests for this type of clarity by industry participants, its own Commissioners (including Commissioner Hester Peirce who now leads the SEC’s Crypto Task Force), and members of Congress. Instead, the SEC under Chair Gensler operated through an enforcement-forward policy posture, but regulation-by-enforcement does not provide the level of clarity or precision necessary to reliably identify where the legal and regulatory lines are drawn, or to allow market participants to structure products with any certainty as to those products’ regulatory status.

Implications for ETFs

The Staking Statement could have a significant impact on certain ETFs, particularly ETFs with underlying assets that rely on a Proof of Stake network consensus such as Ethereum and Solana. Ethereum ETFs are currently not permitted to stake their assets. The Staking Statement may remove a significant impediment that currently prevents existing ETFs to integrate staking into its products, which would generate new revenue streams for investors. The Staking Statement could also facilitate the approval by the SEC of pending applications for various ETFs which would stake digital assets.

Opening the Door for Banking Institutions to Offer Staking Services

An easily overlooked but important implication of the Staking Statement is the effect it will have on banking organizations. 

In 2021, the OCC approved the conversion of a South Dakota Trust company to a national trust bank and affirmed that it could offer staking services. This conclusion rested on OCC Interpretive Letter 1176, which authorized national trust banks to conduct activities permissible for their state-chartered equivalents.^[2] Because South Dakota law permitted staking, the OCC affirmed that those activities were authorized post-conversion.

Because the OCC first authorized staking in an institution-specific context rather than in a broad-scope interpretive letter, and because that institution-specific approval was quickly followed by the imposition of a de facto moratorium on banks engaging in digital asset activities, four years have passed without clarity as to whether national banks (and, by extension via parity and wildcard statutes, state-chartered banks) may offer staking services to customers.

The Staking Statement does not answer that question from the perspective of U.S. federal banking law, but it is a critical and necessary step towards obtaining that clarity from the OCC.  On May 7, 2025, the OCC published Interpretive Letter 1184, which reaffirmed that the authority to provide custody and safekeeping services for digital assets encompasses ancillary services including trade execution and settlement when the bank acts as agent of the customer.^[3]  This conclusion is further supported by the longstanding authority of banks to act as a “finder” to and act as an agent between parties.^[4] These authorities (among others) should logically extend to banks acting in an agency capacity to provide staking services for customers, and now that the Staking Statement has removed lingering uncertainty about interactions of federal securities and banking laws, U.S. banking institutions have a clearer path to a new and desirable digital asset product offering.

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[1] SEC Division of Corporation Finance, “Statement on Certain Protocol Staking Activities” (May 29, 2025) [https://www.sec.gov/newsroom/speeches-statements/statement-certain-protocol-staking-activities-052925]

[2] See OCC Interpretive Letter 1176, “OCC Chief Counsel’s Interpretation on National Trust Banks” (Jan. 11, 2021).  [https://www.occ.gov/topics/charters-and-licensing/interpretations-and-actions/2021/int1176.pdf]

[3] See OCC Interpretive Letter 1184, “Clarification of Bank Authority Regarding Crypto-Asset Custody Services” (May 7, 2025). [https://www.occ.gov/topics/charters-and-licensing/interpretations-and-actions/2025/int1184.pdf]

[4] See 12 C.F.R. § 7.1002