SEC Green Lights Liquid Staking for Institutions

On Tuesday, the U.S. Securities and Exchange Commission (SEC) announced that certain types of liquid staking do not fall under securities regulations, signaling a significant shift in its approach to crypto enforcement and paving the way for greater institutional adoption. This guidance is part of the SEC’s Project Crypto initiative and provides much-needed clarity that tokens representing staked crypto assets are not classified as securities when the related actions are considered 'ministerial or administrative' instead of being driven by entrepreneurial activity. This distinction is seen as a game-changer by those in the industry. Abdul Rafay Gadit, co-founder of ZIGChain, remarked, "The SEC’s liquid staking guidance represents a fundamental shift in how institutional capital interacts with blockchain networks, breaking free from the regulatory gray area that has limited access to this market segment." Gadit elaborated, saying, "The agency has effectively legitimized institutional treasury strategies that were previously hindered by enforcement uncertainties. This allows pension funds and asset managers to earn staking rewards—ranging from 5% to 15% annually—while retaining immediate access to their capital through tradeable receipt tokens, finally addressing the liquidity challenges that have made blockchain staking unfeasible for institutional treasury needs." Although the SEC did not endorse all staking mechanisms, it distinguished between decentralized systems and those governed by managerial decisions, which could allow decentralized liquid staking platforms to operate without regulatory hurdles. According to Marcin Kazmierczak, co-founder of the RedStone oracle protocol, “The SEC’s recent clarity on certain liquid staking activities signifies a turning point for the crypto sector. This information is particularly relevant given the DeFi market's surge to a three-year high of $153 billion, with Ethereum holding a dominant share of nearly 60% of total locked value." Kazmierczak highlighted the rapid growth of Ethereum-based liquid staking protocols as evidence of high demand. He noted that the total value locked (TVL) in liquid staking skyrocketed from $284 million to $17.26 billion in 2024, and as of August 5, it now stands at nearly $24 billion. Gadit indicated that the SEC's new framework is likely to encourage further adoption, as protocols will operate with renewed assurance, providing yields while ensuring compliance. With the capacity to access staking yields without locking funds away for extended periods, institutional investors can stake assets, obtain liquid receipt tokens, and utilize those tokens for collateral, trading, or portfolio management while earning staking rewards at the same time. Kazmierczak also noted that this regulatory language fosters decentralization, motivating liquid staking token providers to minimize human involvement and utilize protocol-based mechanics, which enhances overall ecosystem resilience and aligns with blockchain principles. With Ethereum staking exceeding 33.8 million ETH—about 28% of the total supply—and the total staking market surging to over $60 billion in TVL, this shift by the SEC may herald a new growth phase. Gadit concluded, "This showcases a growing recognition that blockchain networks need institutional participation to reach the scale and security essential for mainstream financial infrastructure." Disclaimer: This article is provided for informational purposes only. It is not intended as legal, tax, investment, financial, or other advice.