The Securities and Exchange Commission (SEC), Division of Corporate Finance, has issued a clarification on staking.
Staking is a process in the crypto sphere where certain holders of digital assets that utilize “Proof of Stake” (PoS) are committed to a consensus process for the network and thus earn income for participating. Node operators validate transactions on the blockchain according to the software that guides the consensus process between different nodes. By supporting the network, participation is rewarded, thus providing an incentive to participate. Staking is a popular method of generating passive revenue for digital asset holders.
The SEC states that node operators are not engaged in an investment contract, but rather are generating income from the process of supporting the network. The SEC explains that federal courts have stated that administrative or entrepreneurial efforts do not qualify as part of the Howey Test, which determines when something constitutes a security.
Even when an individual uses a third party for staking, the Howey Test is not breached, according to the SEC.
The SEC statement on staking is available here.
The statement by the SEC is important as the prior administration treated staking as an investment activity and, in fact, forced multiple providers to shutter these services.
Alison Mangiero, Head of Staking Policy at the Crypto Council for Innovation, welcomed the statement by the SEC’s Division of Finance, saying the SEC now recognizes what they’ve long argued: staking is a core part of how modern blockchains operate, not an investment contract. Mangiero describes the clarification as a “major step forward” and a big win for the crypto community.
“By clarifying that protocol staking, whether conducted by a solo staker, a non-custodial staking service provider or custodial staking service provider, is distinct from investment contracts, the SEC has opened the door to more sensible regulation. This is a win for stakers and the broader crypto community working to build better, more secure infrastructure for the future of the internet.”
She added that the Proof of Stake Alliance (POSA) has worked for years to educate policymakers on staking and the role it plays in securing blockchain networks.
“We’ve consistently argued that protocol staking is not an investment activity—it’s a core function of how modern blockchains operate. Today’s guidance reflects meaningful progress toward recognizing that distinction.”