SEC Clarifies Protocol Staking Not Securities Under Howey Test

The U.S. Securities and Exchange Commission (SEC) stated that protocol staking on proof-of-stake (PoS) networks does not qualify as securities, clarifying its stance on May 29, 2025, easing regulatory concerns.

The clarification by the SEC could potentially increase confidence among U.S. crypto exchanges and platforms engaging in protocol staking. Initial reactions suggest a possible uptick in institutional participation.

SEC’s Division of Corporation Finance declared protocol staking activities, involving only validation functions, are not considered investment contracts. This statement differentiates between native protocol staking and third-party staking services, providing needed regulatory clarity.

Involved in the announcement were the SEC’s Division of Corporation Finance and Commissioner Crenshaw, who critiqued the interpretation. Emphasizing the importance of native staking, the move may reduce some regulatory risks.

Impacts include increased confidence for U.S. platforms in protocol staking, potentially increasing liquidity and total value locked (TVL). Major PoS tokens like Ethereum and Solana could benefit.

Potential business implications involve greater institutional involvement in on-chain validation. This decision delineates regulations for protocol vs. third-party staking services, aligning with past decisions on staking-as-a-service issues.

While the long-term impacts remain to be seen, the decision may encourage further innovation in PoS networks. Observers and participants are expected to continue monitoring SEC guidelines for future regulatory shifts.