SEC clarifies regulatory stance: Under certain conditions, liquid staking and its tokens do not constitute securities issuance.

The U.S. Securities and Exchange Commission (SEC) Division of Corporation Finance released an important statement on Tuesday, clarifying its regulatory perspective on "liquid staking." The SEC stated that the guidance is intended to help crypto participants understand whether such arrangements fall under the jurisdiction of U.S. securities laws. According to the statement, under certain conditions, liquid staking activities and the staking certificate tokens generated by them do not involve the offering or sale of securities, and therefore do not need to be registered with the SEC. This provides critical regulatory certainty for liquid staking protocols and Decentralized Finance (DeFi) participants, while the SEC also warned that if staking service providers take on a more active "entrepreneurial or management role," it could change the regulatory outcome.

Understanding Liquid Staking and Staking Token

• Analysis of Liquid Staking Mechanism: In a liquid staking arrangement, cryptocurrency holders deposit their assets with a third-party or protocol-based provider and receive "staking receipt tokens" in return.
• Token Functionality and Liquidity Advantages: These tokens serve as proof of ownership for deposited cryptocurrency and any rewards obtained through staking. Unlike traditional staking, liquid staking allows users to retain liquidity—the staking receipt tokens can be used in other crypto applications or redeemed later based on protocol conditions (such as the "unbinding" period).
• Two implementation methods: Such arrangements can be achieved programmatically (based on the protocol) through automatically executed code or facilitated by custodians who manage wallets on behalf of users and interact with the staking protocol. In either case, users always retain ownership of their deposited assets during the staking process.

SEC Position: Liquid Staking Does Not Involve Securities

• Core Regulatory Exemption Conditions: The SEC's Division of Corporation Finance clarifies that actions taken in these liquid staking arrangements—including the minting, issuance, and redemption of staking voucher tokens—do not meet the legal definition of a securities offering, as long as the assets themselves are not part of a security or investment contract.
• The role of service providers is key: This determination depends on whether the Liquid Staking Provider (LSP) has not engaged in any "entrepreneurial or management efforts." The SEC believes that the provider does not actively manage users' investments, but merely performs administrative or procedural functions, such as staking assets or selecting node operators.
• Source of Income Determines Nature: Therefore, users' economic benefits directly stem from the staking activities themselves, rather than the service provider's commercial efforts—this is a key distinction made based on the "Howey Test" used to identify investment contracts.

Howey Test Analysis and Provider Role

• Howey Test Application: The SEC applies the Howey Test to assess whether an arrangement constitutes an investment contract. The test looks for three elements: an investment of money, a common enterprise, and the expectation of profits primarily from the efforts of others.
• Role of Technology Facilitator: For liquid staking, the department emphasizes that the role of the provider is limited to technological facilitation, rather than strategic decision-making. Users rely on the consensus mechanism and reward generation of the underlying blockchain network, rather than the management skills or entrepreneurial activities of the provider to generate returns.
• The staking certificate tokens themselves are not securities: The SEC has also clarified the nature of staking certificate tokens. Although they are certificates confirming ownership of deposited cryptocurrencies, they are not receipts for securities unless their underlying assets meet the definition of a security.
• Token value reflects underlying assets: These tokens do not independently generate rewards; instead, their value reflects the performance of the staked assets. As long as the structural design avoids reliance on management efforts and adheres to the stated protocol, the SEC does not consider these tokens to be part of a securities offering.

Regulatory Boundaries and Important Warnings

• Non-Unconditional Exemption: However, the agency warns that any deviation from the parameters mentioned above—especially when the provider plays a larger, more entrepreneurial role—could alter regulatory outcomes. For example, if the provider actively manages the deposited assets beyond basic staking (such as lending or derivatives trading), or has discretion over reward allocation, then the arrangement may be considered as involving the issuance of securities.
• Provide a compliance framework: Therefore, this statement offers a compliance framework for industry participants rather than a comprehensive exemption. Liquid staking service providers must strictly adhere to the positioning of "technology facilitators" rather than "asset managers."

SEC Launches "Encryption Project" Initiative

• Promoting Regulatory Modernization: In a speech delivered on July 31 at the America First Policy Institute, SEC Chairman Paul Atkins announced the launch of "Project Crypto."
• Goals and Vision: This is a comprehensive initiative aimed at modernizing securities regulation and promoting the on-chain development of the U.S. financial markets. Atkins outlined plans to bring cryptocurrency asset issuance back to the U.S. and establish a regulatory framework for digital asset trading.
• Relation to Liquid Staking Statement: This clarification statement regarding liquid staking can be viewed as part of the SEC's efforts to provide clearer regulatory guidance for specific encryption activities under the "encryption project" framework, aimed at fostering responsible innovation.

Conclusion: Providing regulatory certainty for liquid staking and defining compliance boundaries The SEC's statement provides important regulatory clarity for specific models of liquid staking activities, clearly stating that as long as users retain ownership of the assets, service providers only perform technical or administrative functions, and the underlying assets are not securities, these activities and the tokens generated from them are not considered securities offerings. This helps reduce compliance risks and promotes the development of the DeFi staking sector. However, the SEC has also clearly delineated red lines, emphasizing that if service providers overstep and act as "active managers," it will trigger securities law jurisdiction. Market participants need to carefully examine whether their business models align with the SEC's described "non-management" framework, while also paying attention to the broader regulatory changes that "crypto projects" may bring. This statement is particularly important for users and protocol developers participating in liquid staking using non-custodial wallets.