SEC Says "Liquid Staking Tokens Are Not Securities"

The SEC’s Corp Fin division recently confirmed that liquid staking services and liquid staking tokens (LSTs) are not securities. This clears a major regulatory uncertainty for the crypto industry.

So, what does this really mean for crypto users, DeFi developers, and the wider ecosystem? Let’s break it down.

Key Points:

LSTs represent staked assets and can be transferred or used in DeFi without unstaking.
Stakers retain ownership and earn rewards while having liquidity and flexibility.
Comissioner Peirce highlighted the efficiency gains and use cases like using LSTs as collateral.
Protocols such as Lido Finance now have legal clarity to operate and expand in the U.S.
The ruling supports innovation, user empowerment, and U.S. competitiveness in crypto staking and DeFi.

What Did the SEC Say?

The SEC’s guidance, highlighted in a recent statement and reinforced by Commissioner Hester Peirce, confirms that users who stake crypto assets via liquid staking protocols receive LSTs representing their staked position. These LSTs allow holders to transfer their staked value across blockchains and use those tokens in decentralized finance (DeFi) applications without having to unstake and suffer the usual delays or costs.

Commissioner Peirce summed it up well:

LSTs reduce unnecessary transaction costs and create fresh opportunities for users to leverage their staked assets while continuing to earn rewards.

Importance

For years, the legal status of staking derivatives like LSTs was unclear. Could they be considered securities, exposing holders and protocols to strict regulations? With this guidance, that question is largely answered, providing confidence that staking and liquid staking can grow in the U.S. without fear of running afoul of SEC securities laws.

This opens the door for more flexible liquidity and usability of staked assets. Instead of locking tokens away and waiting out long unstaking periods, users can now deploy their staked value for lending, collateral, or yield farming while still benefiting from the underlying staking rewards.

What Should Users Keep in Mind?

While this is a big step forward, it’s still important for users to remain cautious. Liquid staking is based on smart contracts with inherent risks, and the regulatory clarity applies specifically to liquid staking tokens not to every crypto asset or staking model.

Also, this guidance focuses on liquid staking protocols, so other staking or crypto services may still be subject to different compliance standards. By enabling users to maintain control of their assets while unlocking liquidity, liquid staking tokens pave the way for a more dynamic and integrated Ethereum staking ecosystem.