A powerhouse coalition of crypto companies is calling on the US Securities and Exchange Commission to formally declare that crypto staking isn’t subject to securities regulations.
The Crypto Council for Innovation and its Proof of Stake Alliance have submitted a detailed letter to the SEC’s Crypto Task Force, backed by major industry players including Consensys, Kraken, Ava Labs, and Galaxy Digital.
Why Staking Isn’t Investment Activity
The coalition makes a straightforward argument: staking is primarily a technical mechanism to secure blockchain networks, not an investment scheme. When users stake their tokens on proof-of-stake blockchains, they’re participating in network validation and security in exchange for rewards.
The letter draws parallels to the SEC’s recent position on proof-of-work mining, asking for similar clarity for staking activities.
“Staking rewards on a PoS network are best understood as rewards that are earned for providing useful work to the network,” the letter states. “The staking rewards are received in exchange for providing valuable technical services contributing to the PoS consensus mechanism and should not be viewed as passive investment gains.”
The distinction is crucial because if staking services were deemed securities, providers would face significant regulatory burdens that the coalition argues are misaligned with the nature of the activity. The letter emphasizes that stakers retain ownership of their tokens and can unstake them subject to protocol-specific timeframes, unlike traditional securities investments.
Proposed Staking Industry Standards
The coalition has developed practical guidelines for staking service providers that would protect users while avoiding securities classification:
- Focus on operational staking processes rather than promising enhanced rewards
- Use accurate terminology (like “staking rewards” instead of “interest” or “dividends”)
- Maintain user ownership and control of staked assets
- Provide transparency about fees and unstaking processes
- Not offer guarantees about reward amounts
These principles aim to ensure users receive adequate protection without requiring the full apparatus of securities regulation. The letter points out that staking services often already include risk-reducing features, such as slashing protection and clear technical disclosures.
The request comes amid a shifting regulatory landscape, with the SEC under new leadership showing more openness to industry input. Other jurisdictions like Canada, Hong Kong, and the UK have already provided regulatory clarity on staking, potentially giving them competitive advantages in attracting crypto innovation.
The industry’s concern extends beyond immediate business interests to broader ecosystem health. Proof-of-stake blockchains rely on widespread participation to maintain security and decentralization. Regulatory uncertainty could discourage participation, potentially undermining network resilience.
Additionally, the letter notes that clarity would benefit exchange-traded products that might want to stake assets held in trust.
The letter concludes that applying securities regulations to staking would be mismatched with its technical nature: “Imposing the rigid regulatory framework of the securities laws on the providers or developers of staking services would place them in an untenable position, trying to work within a set of requirements meant to address information asymmetries in securities markets that do not exist within this context of providing a technical, commercial service.”
