SEC Ruling Removes Securities Risk for Liquid Staking Tokens

Project Crypto Guidance Clears Path for ETH ETF Staking, DeFi Expansion

The U.S. Securities and Exchange Commission has confirmed that certain liquid staking activities fall outside securities laws, eliminating the need for participants to register with the agency. Issued in early August under Project Crypto, the guidance builds on the SEC’s May decision to exempt both proof-of-stake and custodial or self-custodial staking from securities regulation. The agency clarified that staking receipt tokens such as stETH from Lido or JitoSOL from Jito do not constitute securities unless tied to an investment contract involving covered crypto assets.

Protocols explicitly named in the statement include Lido, which controls over $31 billion in Ethereum staked, JitoSOL and Marinade Finance for Solana, and Stakewise on Ethereum. The SEC defined liquid staking as delegating crypto to a protocol or service provider in exchange for a receipt token that reflects ownership of the staked asset and rewards. This approach allows token holders to stay liquid while earning yields, a structure now operating without the compliance burden of securities registration.

Project Crypto, launched by SEC Chair Paul Atkins, is aimed at reshaping the agency’s rules for crypto-related custody, distributions, trading, and DeFi oversight. Atkins described the liquid staking guidance as a “significant step forward” in clarifying activities that fall outside SEC jurisdiction, emphasizing the shift from regulation by enforcement to a framework centered on exemptions and regulatory clarity.

Market analysts suggest the decision could accelerate institutional adoption, particularly for Ethereum ETFs. Nate Geraci, President of NovaDius Wealth, called the move “the last hurdle” before staking is integrated into spot ETH ETFs, explaining that liquid staking tokens can help manage liquidity within these products. BlackRock and other issuers are expected to consider amendments enabling staking in their listed Ethereum ETFs, a development that could impact both ETF yield strategies and the broader crypto price index.

Beyond staking, legal experts see implications for other token structures. Jason Gottlieb, Partner at Morrison Cohen, noted that the same reasoning may apply to receipt tokens for cross-chain bridges and wrapped assets, which function as proofs of ownership rather than securities. This interpretation could ease regulatory friction for bridged tokens, potentially expanding liquidity across DeFi markets without additional securities oversight.

Liquid staking remains a dominant force in decentralized finance, with total value locked near $67 billion. Ethereum accounts for roughly $51 billion of that amount, led by Lido’s significant market share. The sector’s scale reinforces its influence on the coin market cap of leading protocols, particularly as institutional participation deepens under a friendlier regulatory environment.

The SEC’s position reflects a broader policy direction under the Trump administration, which has sought to define clearer regulatory boundaries for the industry. In addition to exempting proof-of-stake protocols in May, the agency approved in-kind creations and redemptions for Bitcoin and Ethereum ETFs in late July, allowing share-for-crypto transactions. Recent carve-outs for mining, meme coin trading, and stablecoins have signaled a consistent push to reduce enforcement risk for core crypto activities, a shift that continues with the liquid staking guidance.

This article has been refined and enhanced by ChatGPT.