SEC Declares Liquid Staking Tokens Are Not Securities Under Federal Law, Clearing Path for Ethereum and Solana ETFs

SEC Clears The Air On Liquid Staking, Paving Way For ETFs

The U.S. Securities and Exchange Commission (SEC) has clarified that certain liquid staking activities do not fall under securities laws, clearing a major regulatory obstacle for the crypto industry.

The announcement, issued by the Division of Corporation Finance on 5 August 2025, confirms that liquid staking platforms such as Lido, Marinade Finance, and JitoSOL can operate without registering their receipt tokens as securities.

The long-awaited clarification eases concerns from crypto firms and asset managers, many of whom had paused plans for exchange-traded funds (ETFs) involving liquid staking tokens (LSTs).

It now opens the door for broader integration of LSTs in institutional finance, particularly within Ethereum and Solana-based ETF products.

Liquid Staking Tokens Are Not Securities, Says SEC

According to the staff statement, staking receipt tokens—digital assets users receive in exchange for depositing crypto with staking providers—do not count as securities.

These tokens, the SEC explained, are not considered to offer any economic rights or claims to profit, making them different from traditional financial securities like stocks or bonds.

“The Liquid Staking Provider does not decide whether, when, or how much of a Depositor’s Covered Crypto Assets to stake and is simply acting as an agent in connection with staking the Covered Crypto Assets on behalf of the Depositor.”

The Commission concluded that activities such as issuing, minting, or redeeming these staking receipt tokens are "administrative or ministerial" and lack the elements of an investment contract.

“Each of these Ancillary Services is merely administrative or ministerial in nature and does not involve entrepreneurial or managerial efforts.”

The guidance directly references the Howey test—used to determine whether a transaction qualifies as a securities offering—and suggests that liquid staking does not meet the legal criteria.

Katherine Dowling, general counsel at Bitwise, affirmed the move, saying the SEC was making clear that “CERTAIN liquid staking activities do not involve securities.”

Institutions Welcome Clarity, ETF Integration Now Within Reach

Industry leaders responded positively, viewing the decision as a green light for financial products to incorporate LSTs without legal uncertainty.

Mara Schmiedt, CEO of Alluvial, called it a pivotal moment.

She told Cointelegraph,

“Institutions can now confidently integrate LSTs into their products, which is sure to drive new revenue streams, expand customer bases, and enable the creation of secondary markets for staked assets.”

Nate Geraci, president of NovaDius Wealth Management, said the SEC’s position removes the last major barrier for Ethereum staking in ETFs.

He posted on X,

“SEC says certain liquid staking tokens are NOT securities. Think last hurdle in order for SEC to approve staking in spot ETH ETFs.”

The guidance is especially impactful for the likes of Bitwise and VanEck, who recently joined Solana stakeholders in a formal appeal to the SEC requesting approval of LSTs in ETFs.

With over $66 billion currently tied up in liquid staking protocols, $31.6 billion of that in Lido alone, the potential institutional inflow could reshape the DeFi landscape.

Project Crypto Pushes Forward With Deregulatory Agenda

This regulatory update is part of a broader campaign by SEC Chair Paul Atkins under the banner of “Project Crypto,” aimed at realigning SEC policy with modern financial technologies.

Atkins stated in his X post,

“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.”

The decision shows a shift away from former chair Gary Gensler’s strict enforcement and numerous lawsuits against crypto firms.

In contrast, Atkins is moving swiftly to dismantle what he sees as outdated regulatory constraints that have stifled innovation in the U.S. digital asset space.

Last year, the SEC accused Consensys of illegally offering unregistered securities on behalf of staking protocols including Lido and Rocket Pool.

That lawsuit was dropped earlier this year, signalling a shift in tone.

Tuesday’s statement now formalises that shift.

Restaking Excluded As SEC Draws Boundaries

Not all staking models fall outside the SEC’s reach.

The Commission made clear that this guidance does not apply to restaking protocols such as EigenLayer or tokens that provide rights to profits, business income, or asset ownership.

Those structures may still be evaluated as securities under current U.S. law.

This distinction was welcomed by legal analysts, who noted that regulators appear more focused on functional clarity than outright deregulation.

The SEC drew from a 2023 legal paper by the Proof of Stake Alliance, which had long argued that staking receipt tokens are “receipts” and not financial derivatives — language now adopted by the Commission.

A Moment Of Clarity, But Not The End Of The Debate

While the SEC’s statement has been hailed by many in the crypto sector, not everyone within the agency is on board.

Commissioner Caroline Crenshaw issued a dissenting opinion, warning that the new guidance relies on fragile legal grounds and could create more confusion than clarity.

Still, the industry is largely treating this as a long-awaited win.

With staking services sitting at the heart of DeFi and proof-of-stake networks now powering most major blockchains, clearer regulatory boundaries were essential.

The Real Test Now Begins

This clarity may bring short-term relief, but it also puts the industry in the spotlight.

As liquid staking tokens enter ETFs and wider financial products, the true test will be whether these innovations can withstand volatility, ensure security, and deliver value at scale.

Institutional adoption may be here, but so is institutional scrutiny.

The pressure to perform and comply has never been higher.