On May 30, the U.S. Securities and Exchange Commission (SEC) issued a statement clarifying its regulatory stance on certain encryption asset staking activities (Protocol Staking). The statement focuses on public chains that use the attestation mechanism (Proof-of-Stake, PoS), clearly stating that staking activities in various situations do not constitute securities issuance and do not require registration under the Securities Act of 1933 or the Securities Exchange Act of 1934. This statement provides some regulatory clarity for market participants, especially for Node operators, third-party service providers, and encryption asset holders engaged in various forms of staking.
The Fundamentals of Blockchain Operation: Stake and Consensus Mechanism
In a decentralized public blockchain, the PoS consensus mechanism allows participants to verify blocks, maintain network security, and ensure stable operation by "staking" native encryption assets. These assets, referred to as "Covered Crypto Assets," must be temporarily locked in smart contracts, operated by Node Operators who run the nodes and become "Validators" to perform transaction verification and block generation in exchange for newly minted token rewards and transaction fees.
These mechanisms not only rely on encryption to ensure data integrity but also promote the integrity of node operation through economic design incentives. The PoS system selects nodes that stake assets to become validators through automated software protocols and rewards them, forming a closed-loop system of "exchanging contributions for rewards."
Analysis of Three Common Staking Models
The SEC categorizes staking activities into three types:
Self or Solo Staking
The asset holders operate the nodes themselves and stake their own encryption assets. The stakers have full control over the private keys and assets, and the rewards come entirely from their own operations and network feedback, without relying on others for management or operation.
Self-Custodial Staking with a Third Party
Asset holders do not operate nodes but authorize third-party node operators to perform validation tasks. Holders still retain asset and private key control, and rewards are shared proportionally with third parties. Third-party actions are considered administrative support rather than entrepreneurial efforts.
Custodial Staking
Cryptographic assets are held in custody by a custodian, which stakes on behalf of the clients. Although the custodian controls the wallet and executes the staking operations, it must not misuse, lend, or engage in leveraged trading. The SEC believes that this arrangement constitutes an administrative agency action and lacks the entrepreneurial or operational elements required for a security.
Analysis Framework Under Securities Law: Howey Test
The analysis basis of whether the SEC considers encryption staking activities to constitute "securities" is the classic "Howey test", namely:
Is there any monetary investment?
Is there a joint venture;
Are you looking forward to the profits generated from the efforts of others?
The SEC emphasizes that in staking activities, whether self-staking or through third-party services, participants' earnings come from their own technical or administrative operations, rather than relying on the performance of others. Therefore, it does not touch upon the criterion of "efforts of others" in the securities law, nor does it constitute an "investment contract."
Additional services do not constitute elements of securities trading.
The SEC further pointed out that various ancillary services related to staking also provide administrative support, including:
Slashing Insurance: Compensation for penalties caused by Node violations;
Early Unbonding: Shorten the unbonding waiting period;
Asset Aggregation: Assist users in pooling assets to meet staking thresholds.
These services do not involve operational risks or entrepreneurial activities, and are similar in nature to administrative support services in traditional finance; therefore, they do not affect the overall non-security designation of staking activities.
SEC: Regular staking activities do not constitute securities issuance
The SEC's final conclusion is that whether it involves individual staking, collaboration with third parties, or delegating to custodians for staking, if it only involves technical operations and reward distribution of one's own assets, even if executed through third parties, as long as there is no involvement of promised returns, operational management, or others determining the reward method, it does not constitute securities trading. Related activities also do not need to sign up or meet the exemption conditions of securities law.
bring positive impacts to the staking market
The SEC announcement provides a degree of legal certainty for PoS protocol participants in the crypto industry. Although the statement is not legally binding, it reflects the initial attitude of the regulator in this area, helps the industry to assess risks, design services, and provides a clear path for holders to participate. However, the SEC also stressed that its analysis applies only to the specific staking activities described in this statement, and other types need to be examined on a case-by-case basis.
This article from the SEC: Specific forms of cryptocurrency staking activities do not constitute securities issuance. It first appeared in Chain News ABMedia.
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U.S. SEC: Certain forms of crypto assets staking activities do not constitute securities issuance.
On May 30, the U.S. Securities and Exchange Commission (SEC) issued a statement clarifying its regulatory stance on certain encryption asset staking activities (Protocol Staking). The statement focuses on public chains that use the attestation mechanism (Proof-of-Stake, PoS), clearly stating that staking activities in various situations do not constitute securities issuance and do not require registration under the Securities Act of 1933 or the Securities Exchange Act of 1934. This statement provides some regulatory clarity for market participants, especially for Node operators, third-party service providers, and encryption asset holders engaged in various forms of staking.
The Fundamentals of Blockchain Operation: Stake and Consensus Mechanism
In a decentralized public blockchain, the PoS consensus mechanism allows participants to verify blocks, maintain network security, and ensure stable operation by "staking" native encryption assets. These assets, referred to as "Covered Crypto Assets," must be temporarily locked in smart contracts, operated by Node Operators who run the nodes and become "Validators" to perform transaction verification and block generation in exchange for newly minted token rewards and transaction fees.
These mechanisms not only rely on encryption to ensure data integrity but also promote the integrity of node operation through economic design incentives. The PoS system selects nodes that stake assets to become validators through automated software protocols and rewards them, forming a closed-loop system of "exchanging contributions for rewards."
Analysis of Three Common Staking Models
The SEC categorizes staking activities into three types:
The asset holders operate the nodes themselves and stake their own encryption assets. The stakers have full control over the private keys and assets, and the rewards come entirely from their own operations and network feedback, without relying on others for management or operation.
Asset holders do not operate nodes but authorize third-party node operators to perform validation tasks. Holders still retain asset and private key control, and rewards are shared proportionally with third parties. Third-party actions are considered administrative support rather than entrepreneurial efforts.
Cryptographic assets are held in custody by a custodian, which stakes on behalf of the clients. Although the custodian controls the wallet and executes the staking operations, it must not misuse, lend, or engage in leveraged trading. The SEC believes that this arrangement constitutes an administrative agency action and lacks the entrepreneurial or operational elements required for a security.
Analysis Framework Under Securities Law: Howey Test
The analysis basis of whether the SEC considers encryption staking activities to constitute "securities" is the classic "Howey test", namely:
Is there any monetary investment?
Is there a joint venture;
Are you looking forward to the profits generated from the efforts of others?
The SEC emphasizes that in staking activities, whether self-staking or through third-party services, participants' earnings come from their own technical or administrative operations, rather than relying on the performance of others. Therefore, it does not touch upon the criterion of "efforts of others" in the securities law, nor does it constitute an "investment contract."
Additional services do not constitute elements of securities trading.
The SEC further pointed out that various ancillary services related to staking also provide administrative support, including:
Slashing Insurance: Compensation for penalties caused by Node violations;
Early Unbonding: Shorten the unbonding waiting period;
Changing reward payment rhythm: providing flexible reward disbursement options;
Asset Aggregation: Assist users in pooling assets to meet staking thresholds.
These services do not involve operational risks or entrepreneurial activities, and are similar in nature to administrative support services in traditional finance; therefore, they do not affect the overall non-security designation of staking activities.
SEC: Regular staking activities do not constitute securities issuance
The SEC's final conclusion is that whether it involves individual staking, collaboration with third parties, or delegating to custodians for staking, if it only involves technical operations and reward distribution of one's own assets, even if executed through third parties, as long as there is no involvement of promised returns, operational management, or others determining the reward method, it does not constitute securities trading. Related activities also do not need to sign up or meet the exemption conditions of securities law.
bring positive impacts to the staking market
The SEC announcement provides a degree of legal certainty for PoS protocol participants in the crypto industry. Although the statement is not legally binding, it reflects the initial attitude of the regulator in this area, helps the industry to assess risks, design services, and provides a clear path for holders to participate. However, the SEC also stressed that its analysis applies only to the specific staking activities described in this statement, and other types need to be examined on a case-by-case basis.
This article from the SEC: Specific forms of cryptocurrency staking activities do not constitute securities issuance. It first appeared in Chain News ABMedia.