SEC Clarifies Liquid Staking Is Not a Security: A Win for DeFi

In a move that improves the landscape for decentralized finance (DeFi) and staking services in the United States, the U.S. Securities and Exchange Commission (SEC) issued a significant clarification on August 5th, 2025: liquid staking tokens—often referred to as "Staking Receipt Tokens"—are not classified as securities under current law, provided certain conditions are met.

This clarification builds upon the SEC’s earlier May 2025 guidance regarding traditional staking on proof-of-stake (PoS) networks and marks an important regulatory milestone in the evolving treatment of crypto staking by U.S. authorities.

Understanding the SEC’s August Ruling on Liquid Staking

Liquid staking is a process where users can stake their crypto assets on a blockchain while still retaining liquidity through derivative tokens (e.g., stETH for ETH stakers). These staking receipt tokens allow users to interact with DeFi protocols or trade their staked assets while still earning rewards.

The SEC's August guidance clarified that these tokens do not constitute securities when:

• The issuer’s role is administrative, merely passing through rewards and managing the technical aspects.

• The economic return comes from the underlying PoS protocol, not from any managerial effort or entrepreneurial promise by the provider.

This distinction is critical, as it exempts many liquid staking platforms from needing to register with the SEC or comply with extensive securities regulations—provided they stay within the administrative role.

Building on the May 2025 Foundation

This August announcement follows and reinforces the SEC’s May 2025 guidance, which addressed standard PoS staking.

In May, the SEC’s Division of Corporation Finance stated that protocol staking—which includes:

• Self-staking directly on a node,

• Self-custodial staking via a delegated validator, and

• Custodial staking through an exchange—

does not necessarily trigger securities classification if the token owner retains control and the staking is native to the network.

This earlier statement was praised by the crypto industry as a major step toward legitimizing and de-risking participation in PoS ecosystems without fear of retroactive enforcement.

Implications for the DeFi Ecosystem

With these two consecutive statements, the SEC is signaling a more nuanced and modern approach to crypto regulation:

• DeFi platforms like Lido, Rocket Pool, and EigenLayer are now better positioned to operate in the U.S. without regulatory ambiguity.

• Staking receipt tokens may become more widely accepted in centralized exchanges and DeFi lending protocols.

• Projects with governance tokens that reward stakers could see improved institutional interest and liquidity.

The total value locked (TVL) in liquid staking protocols already exceeds $67 billion, according to DeFiLlama, and this figure is expected to grow as regulatory uncertainty fades.

Conclusion: Regulatory Clarity = Industry Confidence

The SEC’s August 2025 clarification on liquid staking receipts, when combined with May’s protocol staking guidance, offers much-needed regulatory clarity for U.S. crypto participants. While some dissent remains inside the Commission—Commissioner Crenshaw, for instance, warned these positions lack formal legal weight—the industry views these steps as de facto legalization of core DeFi infrastructure.

As staking becomes an essential mechanism in the modern internet economy, these decisions from the SEC are likely to shape the next wave of adoption, both in DeFi and in regulated financial products like staking ETFs and crypto retirement accounts.