SEC Clarifies Staking Is Not a Security: A Milestone for Ethereum and Crypto ETFs

In a significant policy shift, the U.S. Securities and Exchange Commission (SEC) has clarified that certain staking activities

Written by: Sophia Cruz • Friday, May 30, 2025 • 2 min read

Quick overview

The SEC has clarified that certain staking activities on proof-of-stake blockchains do not qualify as securities transactions.
This policy shift provides regulatory clarity for the crypto industry, particularly benefiting Ethereum and its transition to a PoS mechanism.
Staking rewards are now considered compensation for services rather than profits, allowing asset managers to incorporate them into Ethereum-based ETFs.
Despite a short-term price decline for Ethereum, the long-term implications of this clarification are seen as bullish for PoS networks.

In a significant policy shift, the U.S. Securities and Exchange Commission (SEC) has clarified that certain staking activities on proof-of-stake (PoS) blockchains do not constitute securities transactions.

This development marks a departure from previous enforcement actions and provides much-needed regulatory clarity for the crypto industry.

The SEC’s Division of Corporation Finance stated that staking rewards earned by validators and node operators are considered compensation for services rendered, rather than profits derived from the efforts of others—a key distinction under the Howey Test used to determine what qualifies as a security. This clarification applies to both custodial and non-custodial staking services, provided they act on behalf of users without determining staking amounts themselves.

This announcement is particularly beneficial for Ethereum (ETH), which transitioned to a PoS consensus mechanism in 2022. The clarification opens the door for asset managers to incorporate staking rewards into Ethereum-based exchange-traded funds (ETFs), potentially offering investors additional income streams. Several firms, including ARK and Fidelity, have filed proposals to include staking in their Ethereum ETFs. With the SEC’s new stance, these proposals may gain traction, leading to innovative financial products that combine the benefits of ETFs with staking rewards.

Despite the positive regulatory news, Ethereum’s price experienced a short-term decline, trading around $2,611.03 at the time of writing. However, the long-term implications of the SEC’s clarification are viewed as bullish, not only for Ethereum but also for other PoS networks like Solana.

This policy shift aligns with the SEC’s broader efforts to establish a more supportive regulatory framework for digital assets. The formation of a new crypto task force under Commissioner Hester Peirce aims to provide clearer guidelines and foster innovation within the industry.

In summary, the SEC’s clarification on staking activities represents a pivotal moment for the cryptocurrency sector. By distinguishing certain staking practices from securities transactions, the SEC has alleviated regulatory uncertainties, paving the way for increased participation in staking and the development of new financial products that integrate staking rewards.

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ABOUT THE AUTHOR See More

Sophia Cruz

Financial Writer - Asian & European Desks

Sophia is an experienced writer, reporter and newsdesk member, mostly on the financial sectors. For the past 5 years Sophia has covered a wide variety of topics such as the financial markets, economics, technology, fin-tech and trading. Sophia has been a part of the FX Leaders team since 2017 and works on producing valuable content and information for traders of all levels of experience.