On May 29, 2025, the SEC’s Division of Corporation Finance (“CorpFin”) issued a statement on certain protocol staking activities. In Particular, the statement addresses the staking of crypto assets that are intrinsically linked to the programmatic functioning of a public, permissionless network, and are used to participate in and/or earned for participating in such network’s consensus mechanism or otherwise used to maintain and/or earned for maintaining the technological operation and security of such network. The statement refers to proof-of-stake as “PoS” and the network as “PoS Networks.” The SEC previously issued a similar statement on proof-of-work mining activities – see HERE.
Protocol Staking
Networks rely on software programming (“protocols”) to reduce reliance on intermediaries, and which programming verifies transactions and provides settlement assurance to its users. Each protocol incorporates a “consensus mechanism” to enable unrelated computers on a network to agree on data and transactions on the network. Public, permissionless networks allow users to participate in the network’s operation, including the validation of new transactions to the network in accordance with the network’s consensus mechanism.
Proof-of-stake (“PoS”) is a method to ensure that operators on the consensus (“Node Operators”) have contributed value to the network that, in some cases, can be forfeited if they act dishonestly. In a PoS Network, a Node Operator must stake the network’s Covered Crypto Asset to be selected programmatically by the network’s underlying software protocol to validate new blocks of data to, and update the state of, the network. While staked the crypto assets are locked-up and cannot be transferred for a period of time. The Node Operators earn rewards of: (i) newly minted crypto assets; and (ii) a percentage of the transaction fees paid in crypto, by the parties who are seeking to add their transactions to the network.
Each networks protocols run a little differently, including how Node Operators are selected, how much crypto is required to be staked and for how long, custody of staked crypto, solo or group staking, the rewards earned, etc.. When a Node Operator deposits staked crypto with a custodian, the Node Operator retains ownership and the custodian cannot use the crypto for operational or general business purposes nor lend, pledge or rehypothecate such assets in any way.
SEC View on Protocol Staking Activities
It is the SEC’s view that protocol staking does not involve the offer or sale of securities under the Securities Act or Securities Exchange Act. Accordingly, it is the SEC’s view that participants in protocol staking activities do not need to be licensed or registered with the SEC. The SEC’s statement relies on the Howey Test in making its determination. In particular, the SEC does not believe that protocol staking involves the investment of money in a common enterprise premised on a reasonably expectation of profits to be derived by the entrepreneurial or managerial efforts of others.
Protocol Staking Activities Covered by the SEC Statement
The SEC’s statement covers the following protocol staking activities:
- Staking covered crypto assets on the PoS Network;
- The activities undertaken by third parties involved in the protocol staking process ‒ including, but not limited to, third-party Node Operators, Validators, Custodians, Delegates and Nominators (“Service Providers”) ‒ including their roles in connection with the earning and distribution of rewards; and
- Providing ancillary services (discussed below).
Only the following types of protocol staking are covered by the SEC statement: (i) solo staking; (ii) self-custodial staking directly with third parties; and (iii) custodial arrangements on the PoS Network.
Ancillary Services
Allowable ancillary services include:
- Slashing coverage – where the service provider reimburses or indemnifies a staking customer against loss resulting from slashing;
- Early unbonding – where the service provider allows crypto assets to be returned to the owner before the end of the staking period;
- Alternative rewards payment schedules and amounts – where the service provider delivers earned rewards at a time and amount that differs from the Networks set schedule;
- Aggregation of covered crypto assets – where the service provider aggregates various node operators crypto assets to meet the protocol’s staking requirements.
The Author
Laura Anthony, Esq.
Founding Partner
Anthony, Linder & Cacomanolis
A Corporate and Securities Law Firm
Securities attorney Laura Anthony and her experienced legal team provide ongoing corporate counsel to small and mid-size private companies, public companies as well as private companies going public on the Nasdaq, NYSE American or over-the-counter market, such as the OTCQB and OTCQX. For more than two decades Anthony, Linder & Cacomanolis, PLLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker-dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions, securities token offerings and initial coin offerings, Regulation A/A+ offerings, as well as registration statements on Forms S-1, S-3, S-8 and merger registrations on Form S-4; compliance with the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers; applications to and compliance with the corporate governance requirements of securities exchanges including Nasdaq and NYSE American; general corporate; and general contract and business transactions. Ms. Anthony and her firm represent both target and acquiring companies in merger and acquisition transactions, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The ALC legal team assists Pubcos in complying with the requirements of federal and state securities laws and SROs such as FINRA for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the small-cap and middle market’s top source for industry news, and the producer and host of LawCast.com, Corporate Finance in Focus. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Ms. Anthony is a member of various professional organizations including the Crowdfunding Professional Association (CfPA), Palm Beach County Bar Association, the Florida Bar Association, the American Bar Association and the ABA committees on Federal Securities Regulations and Private Equity and Venture Capital. She is a supporter of several community charities including the American Red Cross for Palm Beach and Martin Counties, Susan Komen Foundation, Opportunity, Inc., New Hope Charities, the Society of the Four Arts, the Norton Museum of Art, Palm Beach County Zoo Society, the Kravis Center for the Performing Arts and several others.
Ms. Anthony is an honors graduate from Florida State University College of Law and has been practicing law since 1993.
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