A coalition of 30 leading crypto advocacy groups, led by the Crypto Council for Innovation, has formally petitioned the U.S. Securities and Exchange Commission (SEC) to clarify its regulatory stance on staking and staking services. The joint letter, submitted in response to the SEC’s recent request for public input, underscores the industry’s growing concern over regulatory uncertainty surrounding core blockchain infrastructure.
The letter, addressed to SEC Commissioner Hester Peirce, was coordinated through the Proof of Stake Alliance (POSA) a working group within the Council that includes prominent members like Coinbase, the Ethereum Foundation, ConsenSys, and the Blockchain Association. The coalition contends that staking should not fall under federal securities laws, emphasizing that it is a technical process essential to the operation of proof-of-stake (PoS) blockchains, not an investment scheme.
Staking Doesn’t Meet the Howey Test, Coalition Claims
In the letter, the group argued that staking fails to meet the SEC’s Howey test, which determines whether a transaction qualifies as an “investment contract” and therefore a security. According to the coalition, users who stake their tokens are not “investing money with an expectation of profits derived from the efforts of others,” a central criterion of the Howey framework.
Instead, they assert that stakers maintain full ownership of their tokens, can withdraw them at any time, and receive rewards automatically determined by blockchain protocols. Unlike traditional securities, staking does not involve managerial efforts to generate profit, and staking providers merely act as intermediaries connecting users to networks.
Industry Seeks Principles-Based Guidance
The coalition is calling on the SEC to adopt a principles-based regulatory approach, similar to its prior stance on proof-of-work mining. Specifically, the group recommends that the SEC issue clear guidance that recognizes staking as a technical and non-investment function, enabling its integration into products like exchange-traded funds (ETFs).
The letter includes several proposed standards for staking providers to ensure transparency and user protection. These include:
- Transparent disclosures on fees and slashing risks
- Public audits of smart contracts
- Clear, user-friendly consent mechanisms
- Avoidance of promotional or misleading language
By offering such guidelines, the group argues, the SEC can help maintain the U.S.’s competitive edge in the fast-evolving digital asset space.
Global Pressure and ETF Momentum
The call for clarity comes as international regulators in the U.K., Canada, and Hong Kong have already made strides in defining their stance on staking. The coalition warned that without similar action, the U.S. risks driving innovation offshore, disadvantaging American users and firms.
The issue is especially timely as several prominent ETF issuers including Fidelity, Franklin Templeton, VanEck, and Grayscale have submitted proposals to incorporate staking in their spot crypto ETF filings. The SEC has yet to approve any such applications and has recently postponed decisions on several of them.
Despite delays, industry analysts remain optimistic. Bloomberg’s Eric Balchunas and James Seyffart have projected a 75% to 90% chance that many pending crypto ETFs could gain approval by the end of 2025.
As the crypto ecosystem evolves, pressure continues to mount on the SEC to offer a modern regulatory framework that balances innovation with investor protection and this latest letter may prove to be a key turning point.
