SEC clarifies staking receipt tokens are not securities when functioning as proof of deposit

• Staking receipt tokens are digital tools, not securities, when they serve as pure receipts for underlying digital commodities like Ether.
• Staking providers cannot lend, pledge, or reuse deposited coins, and tokens cannot alter the rewards or rights attached to staked assets.
• The SEC dropped its case against Coinbase in February 2025 after staff issued May and August statements reframing protocol and liquid staking as non-securities activities.

• $30 million Kraken paid in February 2023 to settle SEC charges over its staking service
• March 17 date the SEC and CFTC jointly named 16 digital commodities, including Ether
• August 2025 when SEC staff issued liquid staking statement that Commissioner Crenshaw opposed

The SEC’s Division of Corporation Finance published its guidance on Friday in formal FAQs on crypto assets, ending three years of regulatory uncertainty that began when the agency charged Kraken with offering an unregistered securities service. Under the new framework, a staking receipt token qualifies as a digital tool, not a security, if the underlying asset is a digital commodity and the token functions as a pure receipt without changing the rights, obligations, or benefits attached to the staked coin.

Kraken Settlement Forces SEC Reckoning on Staking Classification

In February 2023, Kraken paid $30 million and shut down its U.S. staking service to settle SEC charges alleging it had offered an unregistered securities offering. The exchange had advertised annual returns as high as 21%, framing staking as an investment product with promised payouts.

At the time, then-SEC chair Gary Gensler issued a broad warning: “Whether it’s through staking-as-a-service, lending, or other means, crypto intermediaries, when offering investment contracts in exchange for investors’ tokens, need to provide the proper disclosures and safeguards required by our securities laws.”

The aggressive posture continued in June 2023 when the SEC sued Coinbase, calling its staking program an unregistered securities offering, a case the agency dropped in February 2025.

SEC Staff Reversal: Functional Networks and Maintenance Work Are Not Securities Activities

The pivot came in May and August 2025, when SEC staff issued two separate statements reframing both protocol staking and liquid staking as activities that do not constitute securities offerings.

The core shift is this: once a blockchain network becomes functional, work to maintain, improve, upgrade or grow it no longer counts as “essential managerial efforts” under the Howey test, the 1946 Supreme Court standard that determines whether something is an investment contract requiring registration.

That distinction matters because the Howey test asks whether a buyer reasonably expects to profit from the work of others. If the network is already running, the SEC staff now reason, ongoing development and maintenance are not efforts by the issuer that generate profit; they are utilities the network needs to survive.

Staking receipt tokens, under this logic, are digital tools that evidence ownership of deposited coins, like a warehouse receipt for gold, and therefore do not transfer control or ownership to the issuer, do not alter the rewards, and do not represent a promise of return tied to management work.

But one condition must hold: the staking provider cannot lend, pledge, rehypothecate, or reuse the deposited coins for any reason.

Commissioner Crenshaw’s Dissent Flags Real-World Practices That May Not Fit the Model

Not all SEC officials agreed with the August 2025 statement. Commissioner Caroline Crenshaw issued a response titled “Caveat Liquid Staker,” arguing that the staff’s guidance relied on assumptions that may not match how actual staking programs operate in practice.

The FAQs themselves carry no legal force, they are staff guidance, not rules or regulations. That distinction carries weight now that the Clarity Act, a Senate bill that would have split crypto oversight between the SEC and CFTC, failed this month.

Unlike legislation, staff guidance can be withdrawn or reinterpreted by a future SEC administration, leaving platforms dependent on the current staff’s view rather than statutory protection.

Token Buybacks Get Conditional Treatment Based on Network Maturity

The FAQs also address token buyback announcements, in which a project spends its own money repurchasing tokens from the market. On a network that is already functional, announcing a buyback does not itself constitute a promise that turns the token into a security.

On an unfinished or pre-launch network, however, pitching a buyback as a way to earn returns could still qualify as an investment contract because it would rest on promises of future issuer efforts.

This creates a split standard: mature networks get deference for buyback communications; newer projects do not.

The CCS read. We read this as institutional clarification, not a market opening. The SEC has defined the narrow path: staking receipt tokens work only if they remain pure receipts with no control transfer, no reward manipulation, and no coin reuse by the provider. Platforms like Coinbase and Kraken can now resume services, but under tighter operational constraints than they advertised before. Institutions offering staking will need governance and operational discipline to prove compliance; the risk remains that a future SEC could challenge the staff’s assumptions about what “functional” networks can do.

The open question is how liquid staking protocols that currently take custody or earn additional yield through lending or MEV extraction will reposition themselves under these rules. Commissioner Crenshaw’s dissent suggests the SEC staff may face pushback on enforcement priorities, and no deadline has been set for when the Commission will formally ratify, modify, or reject the Division of Corporation Finance’s guidance.

Original reporting: beincrypto.com