The US Securities and Exchange Commission’s (SEC) new stance on liquid staking has triggered internal dissent, with Commissioner Caroline Crenshaw strongly opposing the agency’s latest staff guidance.
Issued by the Division of Corporation Finance, the guidance states that certain forms of liquid staking do not constitute securities transactions, thereby exempting them from registration under US federal securities laws.
Liquid staking allows crypto holders to earn staking rewards while maintaining asset liquidity through receipt tokens. The SEC staff argued that the process does not involve entrepreneurial or managerial input from providers, and therefore does not meet the criteria for investment contracts under the Howey Test.
These tokens, it said, function solely as proof of ownership over the staked assets and associated rewards.
Commissioner Hester Peirce supported the staff’s interpretation, describing liquid staking as a familiar arrangement akin to depositing assets with an agent who issues receipts.
Today’s statement clarifies the Division’s view that liquid staking activities in connection with protocol staking do not involve the offer and sale of securities.
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However, Crenshaw rebuked the statement, saying it “only muddies the waters”. She warned that the legal conclusions were too narrowly drawn and rested on unverifiable assumptions that may not reflect the actual operations of staking providers.
The Liquid Staking Statement stacks factual assumption on top of factual assumption on top of factual assumption, resulting in a wobbly wall of facts without an anchor in industry reality.
Caroline Crenshaw, SEC Commissioner Crenshaw further argued that the statement fails to offer meaningful clarity, does not represent the Commission’s official view, and lacks legal authority. She added that the guidance provides limited value to crypto entities whose operations differ in any respect from the detailed assumptions outlined in the statement.
The debate underscores ongoing divisions within the SEC as it continues to navigate the fast-evolving landscape of crypto regulation.
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