The SEC has clarified that certain liquid staking models do not constitute securities offerings, providing a clearer regulatory framework for Ethereum-based staking protocols.
Summary
- The SEC’s Division of Corporation Finance issued a staff-level statement clarifying that properly structured liquid staking arrangements do not qualify as securities under federal law.
- Liquid staking models that rely on smart contracts and avoid discretionary control by providers may operate outside the scope of the Howey test.
- Receipt tokens such as stETH and rETH are not considered securities when they reflect ownership of non-security assets and are issued through administrative processes.
- The SEC’s interpretation offers legal clarity for Ethereum’s staking infrastructure and may support increased adoption across developer, institutional, and DeFi environments.
Table of Contents
SEC draws the line on liquid staking
On Aug. 5, the US Securities and Exchange Commission’s Division of Corporation Finance released a formal staff statement clarifying how liquid staking fits within federal securities laws.
According to the Division, properly structured liquid staking programs do not meet the legal definition of a security under Section 2(a)(1) of the Securities Act of 1933 or Section 3(a)(10) of the Securities Exchange Act of 1934.
The statement builds on earlier interpretations of self-staking and custodial staking models but now defines a distinct fourth category: liquid staking, which issues receipt tokens to represent ownership of staked assets.
In structures that meet regulatory criteria, these receipt tokens are not considered securities either, provided they merely reflect ownership and are not tied to the actions or discretion of a third party.
The staff found that qualified liquid staking arrangements avoid investment contract classification because they lack entrepreneurial or managerial oversight.
Service providers in such models perform only administrative functions — routing assets to validators, managing wallets or smart contracts, and issuing tokens without exercising judgment over staking strategy or timing.
The absence of discretion means they do not satisfy the “efforts of others” requirement of the Howey test, which remains the SEC’s key framework for identifying investment contracts.
SEC Chairman Paul S. Atkins called the update “a significant step forward in clarifying the staff’s view about crypto asset activities that do not fall within the SEC’s jurisdiction.”
Under my leadership, the SEC is committed to providing clear guidance on the application of the federal securities laws to emerging technologies and financial activities. https://t.co/KdIA8RAbVq pic.twitter.com/inUB1asKay
— Paul Atkins (@SECPaulSAtkins) August 5, 2025
He added that the SEC’s Project Crypto initiative is already “producing results for the American people,” signaling a more structured and detailed approach to crypto asset classification.
Although the document is a staff-level interpretation rather than a binding rule, it provides clearer guidance for stakeholders navigating staking models under US law.
What liquid staking is and how it works
Liquid staking is already widely used across major proof-of-stake networks. These systems issue receipt tokens that represent a user’s staked assets and reflect accumulated rewards over time.
Unlike standard staking, which typically locks assets for a fixed duration with withdrawal delays, liquid staking offers flexibility — users can trade these tokens, hold them in wallets, or use them in DeFi protocols without needing to unstake the original assets.
Once deposited, the platform takes over the technical responsibilities. It assigns the stake to a validator, monitors uptime and penalties, and adjusts balances to account for rewards or slashing.
Users are not involved in validator selection or operational decisions; their role ends after the initial deposit.
Depending on the setup, custody is handled either by smart contracts or centralized entities like Coinbase Custody.
Regardless of who holds the asset, receipt tokens typically follow one of two models: some increase in redemption value over time to reflect rewards, while others maintain a fixed ratio but issue additional tokens as returns accrue.
In both cases, the tokens are redeemable for the original stake plus yield, with platforms specifying cooldown periods, redemption terms, and any applicable fees.
These tokens act as a bridge between staking and liquidity. They let users continue earning network rewards while using the tokens across lending protocols, exchanges, and other on-chain tools.
Importantly, the process does not involve pooled fund management or promised profits. Control over the underlying crypto remains with the user, and all returns are generated by the protocol itself, not by any third-party intermediary.
Lido, Rocket Pool, and what qualifies
The SEC’s statement has direct implications for liquid staking protocols such as Lido (LIDO) and Rocket Pool (RPL), both of which issue receipt tokens representing ownership of staked Ethereum (ETH).
Tokens like Lido Staked ETH (stETH) and Rocket Pool ETH (rETH) are minted one-to-one with user deposits and accrue protocol-generated rewards, without the provider exercising discretion over user returns.
Lido relies on automated smart contracts to manage staking and token issuance. Once assets are deposited, the process unfolds without manual intervention.
Rocket Pool operates a permissionless network of node operators, making the entire staking and token-minting process programmatic and non-custodial.
In both models, the platforms do not decide how much to stake, when to stake, or which validators to use. Users retain ownership of their staked ETH while using receipt tokens freely across DeFi platforms like Aave (AAVE) and Curve DAO (CRV).
The SEC’s interpretation affirms that, as long as providers avoid performing managerial or entrepreneurial functions, such activities do not constitute investment contracts under the Howey test.
This effectively gives compliant protocols a path to operate without SEC registration, assuming they remain within the outlined parameters.
The guidance also reduces regulatory uncertainty for developers building on top of these tokens, provided their mechanics remain consistent.
However, the interpretation does not apply to centralized providers who layer additional discretion or marketing into their staking services.
For example, Coinbase charges a fixed fee and offers reward projections, potentially blurring the line between protocol-driven returns and provider-managed products.
ETH price and market impact
The SEC’s interpretation could strengthen Ethereum’s long-term utility and market confidence by removing ambiguity around the legal status of liquid staking.
As of Aug. 6, ETH is trading at $3,615, down 4.5% over the past week amid broader market corrections, but still up nearly 40% over the past month, driven by staking demand, ETF inflows, and expanding infrastructure across Ethereum’s layer-2 ecosystem.
ETH price chart | Source: crypto.news
Liquid staking now accounts for over 30% of total ETH staked, with protocols like Lido and Rocket Pool leading adoption. The ability to earn rewards while retaining liquidity has made these systems central to Ethereum’s value proposition.
With legal clarity, institutions may grow more comfortable allocating capital to liquid staking protocols, boosting overall staking participation, which translates into greater demand for ETH and reinforces its role as a productive, yield-generating asset.
The guidance also removes friction around using staking tokens as collateral in DeFi, which is vital to Ethereum’s liquidity layer.
While near-term prices remain subject to market forces, clearer rules create a more stable regulatory foundation, supporting ETH’s broader adoption and utility.
