Staking Crypto Securely and Legally: A Guide for 2025

Essential Insights

• The SEC has clarified that independent staking, delegated staking, and custodial staking, when directly linked to a network’s consensus mechanism, do not fall under securities offerings.

• Post May 29 directive, rewards accrued from network validation are deemed as compensation for services, not earnings from the endeavors of others, thus exempting them from the Howey test categorization.

• Validators, node operators, and both retail and institutional stakers can now engage without concerns of regulatory ambiguity, promoting broader acceptance of PoS networks.

• Yield farming, ROI-guaranteed DeFi bundles, and staking-masked lending schemes remain outside legal parameters and may be classified as securities offerings.

On May 29, 2025, the US Securities and Exchange Commission released new guidance concerning crypto staking to enhance regulatory clarity. Prior to this guideline, investors and service providers were uncertain whether regulators would categorize staking rewards as securities, which posed a risk of legal complications.

The SEC’s recent action unequivocally defines which forms of staking are permissible and which are not. The guidance provides solid regulatory backing for node operators, validators, and personal stakers, acknowledging protocol staking as a fundamental network operation rather than a speculative venture.

This article elucidates how regulators will approach crypto staking under the updated regulations, the activities still prohibited, who will gain, and which practices to avoid.

Whether you are an independent validator or utilizing a staking service, grasping these updates is essential for maintaining compliance in the US.

The SEC’s Latest Guidance on Staking

In 2025, the SEC’s Division of Corporation Finance unveiled pivotal guidance specifying when protocol staking on proof-of-stake (PoS) networks will not be deemed as a securities offering.

• This guidance pertains to independent staking, delegating to third-party validators, and custodial arrangements as long as these methods are directly associated with the network’s consensus process.

• The SEC indicated that these staking activities do not fulfill the definition of an “investment contract” according to the Howey test.

• The regulator also differentiated authentic protocol staking from schemes that guarantee returns from others’ efforts, such as lending or speculative platforms.

• As per the guidance, staking rewards obtained via direct engagement in network operations—such as validating transactions or securing the blockchain—will not be interpreted as investment returns.

Which Staking Activities Are Permitted Under the New SEC Regulations?

The SEC’s Division of Corporation Finance has specified that certain staking activities on PoS networks, when performed as part of a network’s consensus mechanism, do not qualify as securities offerings. These protocol-staking activities are considered administrative, rather than investment contracts.

Here’s what the guidelines explicitly authorize:

• Independent Staking: The new SEC guidelines allow individuals to stake their crypto assets using their own resources and infrastructure. As long as they maintain ownership and control of their assets and engage directly in network validation, their staking will not be classified as a securities offering.

• Delegated Staking (Non-Custodial): The SEC permits users to delegate their validation rights to third-party node operators while retaining control over their crypto assets and private keys. This remains compliant since it does not involve transferring ownership or anticipating profits from others’ management. Whether a node operator stakes its own crypto assets does not change the Howey analysis regarding protocol staking.

• Custodial Staking: Custodians such as crypto exchanges can stake on behalf of users if assets are clearly held for the owner’s advantage, not utilized for other purposes, and the process is transparently disclosed to the owner prior to the activity.

• Operating Validator Services: The guideline allows you to run validator nodes and earn rewards directly from the network. These actions are regarded as delivering technical services instead of investing in a third party’s business.

Did You Know? Independent staking necessitates running your own node, often with substantial minimum token requirements, such as 32 Ether (ETH) for Ethereum. Staking pools allow users to aggregate smaller amounts, democratizing access.

SEC Guidelines on Ancillary Services in Crypto Staking

Service providers may offer “ancillary services” to holders of crypto assets. These services should be administrative or ministerial, not involving entrepreneurial or managerial efforts:

• Slashing Coverage: Service providers may indemnify owners for losses incurred due to slashing, akin to protections in traditional business transactions, covering node operators’ mistakes.

• Early Unbonding: Protocols may return assets to owners before the protocol’s unbonding phase concludes, shortening the wait for owners.

• Flexible Rewards Schedules: Projects may distribute staking rewards on a timetable or frequency that diverges from the protocol’s without fixing or guaranteeing amounts beyond what the protocol stipulates.

• Asset Aggregation: Protocols may pool owners’ assets to meet staking minimums, serving as an administrative step in the validation process that aids staking without being entrepreneurial.

How the New SEC Guidelines Will Benefit Stakeholders in a PoS Ecosystem

The SEC’s guidance on protocol staking supports various stakeholders in the PoS ecosystem.

The primary advantages include the following:

• Validators and Node Operators: They can now stake assets and earn rewards without the necessity of registering under securities laws. This clarification mitigates legal risks for individual stakers and professional operators on networks like Ethereum, XDC, and Cosmos.

• PoS Network Developers and Protocol Teams: The guidance affirms that protocol staking is not regarded as an investment contract, validating PoS network designs. This enables developers to expand their…
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  projects without modifying token economics or compliance frameworks. 

• Custodial service providers: Cryptocurrency exchanges and platforms providing custodial staking can function lawfully by transparently outlining terms and maintaining assets in distinct, non-speculative accounts. 

• Retail investors and institutional participants: They can partake in individual or delegated staking with increased confidence. This clarity motivates compliance-oriented organizations to participate in the PoS ecosystem. 

These regulations are expected to enhance wider staking engagement, bolstering PoS blockchain security and decentralization by amplifying the quantity and variety of validators.

Did you know? The notion of staking originated in 2012 with Peercoin, the inaugural PoS blockchain. Unlike mining, it enables users to “stake” coins for transaction validation, paving the way for contemporary networks like Ethereum Consensus Layer and Cardano to emphasize energy efficiency and broader involvement.

Staking vs. securities: The SEC’s boundary

While the SEC’s recent guidance supports protocol-based staking associated with network consensus, it delineates a distinct line between legitimate staking and actions that mimic investment contracts. The following practices remain excluded from the guideline’s scope: 

• Yield farming or staking schemes unrelated to consensus: Gaining returns from investing tokens into pools that do not aid in blockchain validation or network security still falls under securities regulations. 

• Bundled, obscure DeFi staking offerings promising ROI: Platforms providing intricate, combined products with ambiguous reward origins or profit assurances remain vulnerable to regulatory scrutiny. 

• Centralized platforms masquerading lending as staking: Services that lend user assets or generate returns through third-party investments while marketing it as “staking” do not qualify under the updated guidance and could be viewed as unregistered securities.

This statement pertains to protocol staking generally rather than all its variations. It does not cover all forms of staking, including staking-as-a-service, liquid staking, restaking or liquid restaking. Node operators are generally allowed to share rewards or enact fees for their services in ways that differ from the protocol. 

Optimal practices for compliant crypto staking in 2025

As the SEC formally acknowledges protocol staking as non-securities activity, participants and service providers should implement comprehensive compliance measures to remain within the secure zone. These practices guarantee transparency, safeguard user rights, and mitigate regulatory risks.

Here are the optimal practices for compliant crypto staking in 2025, aligned with the SEC’s guidance:

• Ensure that staking directly contributes to network consensus: Only stake assets in a manner that aids in blockchain validation. Your investments should yield rewards programmatically through the protocol, not through management or investment-like activities.

• Uphold transparent custodial agreements: Custodians must explicitly disclose asset ownership, refrain from utilizing deposited assets for crypto trading or lending, and operate solely as agents facilitating staking.

• Seek legal advice prior to launching staking services: Consult legal professionals to ensure staking services are administrative in nature and comply with SEC guidance.

• Refrain from offering fixed or guaranteed returns: The protocol should dictate the earnings to avoid classification as an investment contract under the Howey test.

• Utilize clear, standardized disclosures and contracts: Provide detailed documentation clarifying user rights, asset utilization, fees, and custody terms to prevent misunderstandings.

Adhering to these practices guarantees that staking activities are compliant, transparent, and in harmony with the SEC’s focus on consensus-driven participation.

Did you know? Staking can generate 5%-20% annual returns on tokens such as Cosmos or Tezos, providing cryptocurrency holders with passive income. In contrast to trading, it is low-effort — lock tokens, support the network, and earn rewards — making it a favored choice for long-term investors.

Are 2025 SEC guidelines a pivotal moment for crypto staking?

The SEC’s 2025 directive represents a notable advancement for crypto staking in the US, offering explicit rules for staking in PoS protocols. The guidance distinguishes protocol staking, which supports network consensus, from yield-generating products regarded as investment contracts.

The SEC confirmed that self-staking, self-custodial staking, and specific custodial arrangements are not categorized as securities offerings, resolving a significant legal ambiguity that has hindered participation.

This framework allows individual validators and users to delegate tokens to third-party node operators for operation, as long as they retain control or ownership of their assets. The SEC perceives staking rewards as remuneration for services, not as profits from managerial endeavors, thereby exempting them from the Howey test.

The guideline establishes a solid foundation for compliant staking infrastructure, fostering institutional adoption, innovation in staking services, and enhanced retail participation. 

By emphasizing transparency, self-custody, and alignment with decentralized networks, the SEC’s strategy could bolster the development of PoS ecosystems while deterring risky or vague staking practices. For the US crypto sector, this marks a much-needed regulatory endorsement.

This article does not offer investment advice or recommendations. Every investment and trading decision carries risks, and readers should conduct their own research before making decisions.