SEC’s New Guidance on Crypto Staking: What’s Allowed and What’s Not

In May 2025, the US Securities and Exchange Commission (SEC) issued long-awaited guidelines providing regulatory clarity on crypto staking activities. The new rules are designed to distinguish between legitimate protocol staking activities and those that resemble investment contracts, offering much-needed guidance for investors and service providers in the crypto space.

Before this, many participants were unsure whether their staking rewards could be classified as securities under US law, leaving them vulnerable to legal risks. Now, the SEC’s Division of Corporation Finance has confirmed which activities are allowed and which are prohibited under US securities law.

SEC’s Stance on Staking
The SEC clarified that staking rewards from activities directly tied to proof-of-stake (PoS) networks’ consensus mechanisms are not considered securities under the Howey test, a key legal framework used to determine whether an investment qualifies as a security. This means activities like node validation and blockchain security are not investment contracts.

Here’s a breakdown of what’s allowed under the new SEC rules:

1. Solo Staking (Non-Custodial)

Solo staking involves users using their own resources and infrastructure to participate directly in network consensus. This type of staking is not considered a securities offering, as long as users retain ownership of their assets and control over their validation efforts.

Example: Ethereum 2.0, where users must run their own nodes (with 32 ETH minimum) to participate in staking.
2. Delegated Staking (Non-Custodial)

Users can delegate their staking rights to third-party validators while retaining control of their assets and private keys. This is permitted as long as the delegation does not involve transferring ownership or profits from others’ managerial efforts.

Example: Delegating ETH to a third-party validator for staking rewards, without transferring ownership of the ETH.
3. Custodial Staking

Crypto exchanges or other custodial platforms can stake on behalf of their users, provided the assets are held for the owner’s benefit, and clear disclosures are made to the user about how their assets are being used.
The custodian is not allowed to use the funds for other purposes (like lending them out for profit) without explicit consent from the user.
4. Running Validator Services

Validators who run their own nodes and participate in network validation are treated as providers of technical services, not as investors in a business. They earn staking rewards from the network directly, without the need to register under securities laws.
5. Ancillary Services in Crypto Staking

Service providers can offer certain administrative or ministerial services that are not considered entrepreneurial efforts, such as:

Slashing coverage: Protection against slashing (punitive actions for validator failure).
Early unbonding: Returning assets before the official unbonding period ends.
Flexible rewards schedules: Providing staking rewards more frequently than the protocol dictates, without guaranteeing fixed amounts.

What’s Not Allowed Under SEC Guidelines
While the new guidance supports several forms of staking, the SEC draws a clear distinction between legitimate protocol staking and activities that resemble securities offerings.

The following types of staking still fall under securities laws:

1. Yield Farming or Staking Not Tied to Consensus

Yield farming or staking that involves depositing tokens into pools that do not contribute to blockchain validation or security may still be considered a securities offering. For example, providing liquidity to a DeFi pool that doesn’t directly support the consensus mechanism is prohibited.
2. Bundled or Opaque DeFi Staking Products

Staking products that aggregate or bundle tokens in ways that are unclear or guarantee returns could be viewed as investment contracts. If a platform promises high returns or profits without clearly explaining how rewards are generated, this may trigger regulatory scrutiny.
3. Centralized Platforms Disguising Lending as Staking

Services that lend user funds or generate returns through third-party investments, but label the activity as staking, do not meet the SEC’s guidelines. For example, platforms that pool assets for staking but then lend out those assets to earn profits could face legal challenges.
4. Staking-as-a-Service (SaaS) or Liquid Staking

The SEC guidance does not cover all forms of staking, including emerging activities like staking-as-a-service (SaaS) or liquid staking, which may involve more complex arrangements and additional legal scrutiny.
How the New SEC Guidelines Benefit Stakeholders
The SEC’s updated framework brings significant benefits to key stakeholders in the proof-of-stake (PoS) ecosystem, including validators, node operators, crypto exchanges, and retail investors. Here’s how:

1. Validators and Node Operators

They can now confidently stake assets and earn rewards without fear of being classified as securities issuers. This is particularly important for networks like Ethereum, XDC, and Cosmos, where staking is a fundamental activity.
2. PoS Network Developers and Protocol Teams

PoS network developers can continue building their projects without worrying about inadvertently violating securities laws. The clarity that protocol staking is not a securities offering allows them to grow their ecosystems more freely.
3. Custodial Service Providers (Crypto Exchanges)

Platforms offering custodial staking can now operate legally, as long as they comply with the guidelines around transparency, asset ownership, and user disclosures.
4. Retail Investors and Institutions

Retail investors can participate in solo staking or delegated staking with greater confidence, knowing that they are compliant with US securities law. This will likely encourage more institutional investors to enter the PoS ecosystem.
Conclusion: A Step Toward Greater Staking Participation
The SEC’s 2025 guidelines on staking provide the crypto industry with clear rules on what types of staking activities are allowed and which are not. This regulatory clarity aims to reduce legal risks for participants while promoting the growth of proof-of-stake networks. By supporting solo staking, delegated staking, and custodial services, the SEC is fostering a more secure and compliant staking environment.

As decentralization and network security remain critical to the future of blockchain ecosystems, the SEC’s new framework will likely lead to broader participation in staking, driving further innovation in the space. However, stakeholders must remain mindful of the clear distinctions between legitimate protocol staking and activities that resemble securities offerings, ensuring they stay within the lines of regulatory compliance.