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Perspective by: Margaret Rosenfeld, chief legal officer of Everstake
At the emergence of the internet in the late 1990s, technology surpassed regulation — and lawyers, engineers, and policymakers had to adapt collaboratively in real-time. Some regulators perceived the internet as a menace, while others viewed it as an opportunity.
The individuals who made the most meaningful impact, however, were those willing to engage directly with the technology’s workings. That level of involvement — technical literacy, not tech fear — allowed the internet to transition from a niche novelty to an integral infrastructure.
The situation is akin to what we see now in crypto, with the Securities and Exchange Commission’s (SEC) recent announcement on staking serving as an initial indication that the agency is beginning to discern the distinction between taking part in a network and investing in a security.
A pivotal moment for crypto regulation
The SEC’s May 2025 guidelines on specific protocol staking activities signified the first instance where the SEC publicly recognized that certain forms of staking could be outside the parameters of securities transactions. In doing so, it provided a long-anticipated signal: Engaging in blockchain consensus — especially in a non-custodial or protocol-native approach — may not necessitate securities registration.
This represents a critical transformation. Should staking be appropriately regarded as participation in infrastructure rather than speculative investment, it could realign the US with other jurisdictions that have adopted a more nuanced perspective.
The fundamental challenge lies in the application of the legal Howey test. For years, critics contended that staking inherently signifies an “investment of money in a common enterprise with an anticipation of profits from the efforts of others.” This presupposes that all staking resembles centralized yield products — whereas numerous proof-of-stake mechanisms function without custody, pooling, or performance guarantees. When token holders assign tasks to validators, they contribute to securing the network, not entering a profit-driven contract.
This is not merely a theoretical distinction. Treating protocol staking as a securities transaction imposes substantial compliance obligations: registration, disclosures, custody requirements, and anti-fraud duties created for conventional financial instruments.
If such regulations are imposed on open-source blockchain infrastructure, the consequence would be suppressing validator activity and driving innovation overseas. However, a differentiated framework that distinguishes non-custodial staking from custodial or pooled models upholds investor protection and decentralization of protocols.
Policy advancement begins with protocol-level comprehension
What facilitated this enhanced regulatory comprehension was not solely legal theory but also technical elucidation. Effective dialogue between regulators and the industry required more than merely submitting legal documents. It necessitated walking through validator operations, staking mechanics, and protocol-level architecture with engineers, developers, and infrastructure operators.
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When regulators collaborate with lawyers and those developing these systems, policy becomes entrenched in real-world understanding. The SEC’s recent terminology reflects that kind of informed, cooperative engagement.
The announcement does not eliminate enforcement risks, particularly for platforms that combine staking with liquidity assurances or profit guarantees. It does suggest that the agency is prepared to consider technical realities.
The market implications of that transition are considerable. It grants US-based developers and validators a more solid legal foundation and conveys to institutional participants that there is scope for compliant infrastructure development.
Commissioner Hester Peirce has long advocated for the SEC to assess blockchain services based on their actual design rather than superficial similarity to traditional finance. Consistent with that perspective, the agency’s new guidance implicitly recognizes that not every staking model entails a “promoter,” an “issuer,” or a profit promise. This transformation would permit developers to create systems that bolster network security without the apprehension of triggering securities laws if appropriately executed.
Skeptics argue that any token-based reward mechanism is, by its nature, a financial return. This oversimplifies the diversity of blockchain protocols. Frequently, staking rewards are protocol-defined emissions linked to network participation — not discretionary allocations from a centralized entity. Delegators maintain control of their assets, and validators deliver a technical service rather than a financial one. Economic design aligns more closely with system maintenance than equity investment.
This distinction isn’t merely semantic — it’s fundamental to how decentralized infrastructure operates. Imposing one-size-fits-all securities laws on such systems risks distorting incentives, overly regulating developers, and placing the US behind in the global competition for blockchain expertise.
That’s why it’s crucial that the SEC seems open to engaging in dialogue — rather than merely dictating outcomes.
Developing smarter policy through cooperation
Improved regulation doesn’t always necessitate crafting entirely new laws. It requires interpreting existing frameworks with a comprehensive grasp of the underlying technology. This includes acknowledging when certain activities — like non-custodial staking — fall short of the threshold for a securities transaction, even if they superficially appear to involve financial activity.
The SEC’s announcement is not a universal safe harbor. It does, however, signify that technology-specific engagement is unfolding and that the SEC might be ready to continue differentiating between infrastructure and investment. That’s not just sound policy — it’s how innovation takes root.
Similar to the internet era, crypto will progress from the periphery to the frontier to mainstream — but only if regulators invest the time to comprehend how blockchain systems truly operate. The SEC’s action regarding staking reflects that understanding is attainable. More advancements will follow if the industry keeps engaging policymakers at the table — not merely through legal discussions, but with tangible education.
Perspective by: Margaret Rosenfeld, chief legal officer of Everstake.
This article is for informational purposes and is not intended to be legal or investment advice. The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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