On August 5, 2025, the Securities and Exchange Commission Division of Corporation Finance released a statement on liquid staking as a follow-on to its May 29, 2025, protocol staking statement. The liquid staking statement clarifies that certain liquid staking activities do not constitute securities offerings under federal securities laws. This guidance represents Corp Fin’s views and is not legally binding; however, the guidance nonetheless represents another important development for the digital asset industry, providing regulatory clarity around liquid staking arrangements.
Corp Fin previously provided its views on certain types of protocol staking in a staff statement, which addressed three types: self (or solo) staking, self-custodial staking directly with a third party, and so-called “custodial staking.” The August 5 statement addresses liquid staking, a fourth type.
As described in our previous alert relating to the SEC’s statement on protocol staking, staking refers to the process by which blockchain users commit (or “lock”) digital assets as collateral to support the security and operation of a blockchain network. The mechanism serves as an economic deterrent to malicious or faulty behavior: entities called validators that are responsible for proposing and validating new blocks are incentivized to act honestly, because their staked assets can be partially or entirely forfeited (a process known as slashing) in the event of misconduct or protocol violations.
In delegated proof-of-stake systems, token holders who are not themselves validators can participate by delegating their stake to chosen validators. These delegations increase the validator’s effective stake and, in turn, the validator’s chances of being selected to propose blocks and earn rewards. Delegators typically share in the validator’s rewards, but they also share in potential penalties, creating aligned incentives across the network.
Liquid staking is a mechanism that allows blockchain users to participate in staking while retaining liquidity and transferability of their staked assets. Instead of locking tokens directly with a validator, a user deposits them with a protocol that stakes on their behalf. In return, the user receives a staking receipt token (SRT), which reflects their staked position and can typically be transferred, traded, or used in decentralized finance applications.
This structure enables users to earn staking rewards while still maintaining flexibility and liquidity. However, the representative tokens remain economically linked to the underlying staked assets: they are subject to changes in value, slashing risk, validator performance, and other protocol-level risks.
The liquid staking activities covered by the statement include:
The statement is limited to liquid staking where the deposited crypto is comprised of covered crypto assets which were previously defined in the Corp Fin statement on protocol staking as:
[C]rypto assets that are intrinsically linked to the programmatic functioning of a public, permissionless network, and are used to participate in and/or earned for participating in such network’s consensus mechanism or otherwise used to maintain and/or earned for maintaining the technological operation and security of such network
The term does not include assets that are securities or have been offered as investment contract securities. Furthermore, the statement only discusses SRTs that are issued on a one-for-one basis with the underlying deposited crypto, functioning merely as receipts.
The guidance excludes arrangements where a provider guarantees or directly influences rewards. If the provider promises returns or actively manages staking economics, those arrangements may trigger securities law scrutiny.
The guidance also excludes restaking (using assets staked on their native crypto network for additional crypto networks or crypto applications).
Corp Fin’s statement on liquid staking expresses its view that neither the liquid staking activities nor the offer and sale of SRTs involves the offer and sale of securities within the meaning of the securities laws. Accordingly, participants in liquid staking activities and issuers or secondary market sellers of SRTs are not subject to the securities laws from those activities.
In reaching this conclusion, Corp Fin emphasized that the hallmarks of an “investment contract” were not present. Under the U.S. Supreme Court’s Howey Test, named after a 1946 case, an “investment contract” exists where there is (i) an investment of money, (ii) in a common enterprise, (iii) with a reasonable expectation of profits, (iv) to be derived from the efforts of others. Corp Fin reasoned that while participants commit assets and receive SRTs in return, the core activities (staking on a permissionless protocol, minting and redeeming SRTs, and distributing protocol-driven rewards) are largely mechanical and programmatic. SRTs merely evidence ownership of deposited assets and do not, themselves, generate rewards. The generation of yield is a function of network rules and validator performance, not the entrepreneurial or managerial efforts of an issuer or promoter. As a result, Corp Fin reasoned that neither the liquid staking activities nor the issuance and secondary trading of SRTs involve the type of managerial discretion or profit expectation that would trigger the securities laws.
Corp Fin’s statement articulates a staff position and does not carry legal force or bind the full commission, but it reflects a current interpretive stance likely to influence enforcement decisions. The guidance continues Corp Fin’s recent trend of providing clarity on crypto asset activities, following similar statements on protocol staking (noted above), proof-of-work mining, stablecoins, and registered offerings.
Counsel Dan Winnike contributed to this alert