Crypto Advocacy Groups Push SEC for Staking Clarity

A coalition of crypto advocacy groups is urging the SEC to provide clear guidelines on staking, asserting it’s a technical process rather than an investment. They argue it should not be classified as a security under federal regulations and advocate for principles-based guidance similar to mining regulations. Prominent firms like Andreessen Horowitz and Kraken support this initiative, as the SEC continues to deliberate on crypto-related ETFs.

Nearly 30 cryptocurrency advocate groups are rallying together, spearheaded by the Crypto Council for Innovation (CCI), to call on the US Securities and Exchange Commission (SEC) for clearer guidance surrounding crypto staking and its associated services. In a letter addressed on April 30 to SEC Commissioner Hester Peirce, who leads the agency’s Crypto Task Force, the CCI’s Proof of Stake Alliance (POSA) took a firm position, stating that staking should be seen as a technical process rather than a mere investment activity.

The group’s letter highlights that staking is not just a niche pursuit; in fact, they claim it’s crucial for the decentralized internet’s infrastructure. Responding to the SEC’s request for public input regarding potential regulations on staking and its liquid variant—which allows users to lock tokens for additional earnings—the coalition is advocating for the responsible integration of staking features into exchange-traded products (ETPs). Moreover, they urged for caution against overly detailed regulations that might hinder market growth and innovation in staking.

One of the key arguments put forward by the coalition is that staking does not qualify as an “investment contract” under the well-known Howey test. The basis of their argument lies in the fact that stakers keep ownership of their assets while blockchain protocols—not the actions of staking providers—determine the rewards earned. The group asserted that the income generated through staking isn’t a result of managerial decisions akin to traditional corporate profits.

The letter also expressed the desire for the SEC to create principles-based guidance similar to the recent SEC staff statements concerning proof-of-work mining. They emphasized that in the last four months, there has been a noticeable increase in constructive discussions with the SEC; the group stated, “Now, the industry is stepping up with concrete principles to include in guidance — a reflection of this new collaborative approach.”

Prominent supporters of this call for clarity on staking include major players in the crypto arena, such as the reputable venture capital firm Andreessen Horowitz (a16z), blockchain software provider Consensys, and the crypto exchange Kraken, which resumed staking operations in the US earlier this year.

As of now, the SEC has yet to green-light any crypto staking exchange-traded fund (ETF), including a recent postponement regarding Grayscale’s spot Ether ETF, where a decision was deferred on April 14. Interestingly, Bloomberg ETF analyst James Seyffart expressed optimism in April, forecasting that an Ether ETF with staking features could possibly emerge as soon as this May.

This development arrives as discussions around ZK-proofs are also heating up, which have the potential to unlock significant Bitcoin resources for decentralised finance, a trend echoed by platforms like BitcoinOS and Starknet.