SEC Issues Guidance on Securities Status of Liquid Staking Tokens

The SEC recently shared guidance on how liquid staking tokens (LSTs) fit into current securities laws. The guidance isn’t legally binding, but it helps clear up confusion in a space that has lacked clear rules.

Liquid staking, which allows crypto holders to earn rewards while retaining the liquidity of staked assets, has become increasingly popular. By defining its stance, the SEC is signaling a cautious but notable step toward more predictable regulatory treatment.

The SEC’s Position on LSTs Explained

Liquid staking is essentially a mechanism where investors lock crypto into a network to earn rewards while simultaneously receiving a derivative token that represents their staked assets. The SEC’s Division of Corporate Finance stated that such activities, when structured properly, “do not involve the offer and sale of securities.” The guidance emphasizes that providers should not retain control over the staking process and that new tokens should merely represent ownership of the underlying deposits.

The clarification comes amid continued pressure from industry leaders, including major companies pushing for the inclusion of liquid staking tokens in products such as Solana-based ETFs. The SEC is now providing a clearer framework that offers firms some guidance while maintaining regulatory boundaries. For companies working in this space, understanding these details is key. The update helps define which practices fall within legal boundaries.

That said, this is not full approval. If these tokens are part of investment contracts or meet conditions outlined in the Howey test, they will still be regulated. The message may sound promising, but it comes with serious conditions.

Lessons from ETF Staking Precedents

The SEC's view on LSTs aligns with its earlier rulings on staking within ETFs. Earlier this year, the Commission approved staking features in select ETFs. That decision signaled a shift toward treating staking rewards as separate from conventional securities. As a result, several issuers began including staking in their ETF proposals, and some of those products have already launched.

Bloomberg analyst Nate Geraci and others have pointed out that resolving these regulatory issues could make it easier to incorporate staking into Ethereum spot ETFs. It is still important to distinguish standard staking from setups that resemble broader investment contracts. Despite the presence of ETF precedents, some situations continue to fall within the SEC's regulatory scope. For both issuers and investors, knowing where those lines are drawn is crucial when working with staking models.

This reflects a measured approach from the SEC. While the agency remains cautious, it is also showing a willingness to adapt to new developments in the digital asset space.

Implications for Businesses and Investors

For crypto businesses, the SEC's recent remarks on LSTs offer a level of regulatory clarity. This may help companies design and present liquid staking products with more confidence. Investors also benefit by gaining a better sense of which offerings may face fewer compliance issues. Even so, the non-binding nature of the guidance means risks remain.

The timing is notable. Interest in staking ETFs and liquid staking products is rising again, especially during active summer trading periods. While not a major shift, the SEC’s position may influence market behavior, including new product development and secondary trading activity. However, market participants should be mindful that regulatory positions are subject to change.

Though the statement is not a full endorsement, it marks a step toward clearer regulation. Firms that treat the guidance seriously, while staying ready to adjust, may benefit from a more stable foundation for liquid staking activities.

What to Expect Next?

The SEC’s guidance on liquid staking tokens, though not legally binding, sends an important message to the crypto industry. By outlining situations where these tokens are not classified as securities, the Commission gives firms and investors a clearer path toward compliance.

While the sector must still proceed carefully, this update may help liquid staking gain further legitimacy. Keeping up with regulatory changes will be key as the crypto landscape continues to shift.