A few crypto advocate groups, in collaboration with Crypto Council Innovations (CCI), submitted a letter to the Securities and Exchange Commission (SEC) requesting regulatory clarity on staking. A coalition of 30 crypto advocacy groups, including the POSA–the staking alliance of CCI- jointly submitted this letter, addressed to the SEC Commissioner arguing that staking is not an investment.
According to an announcement posted on the CCI website, “The letter, addressed to Commissioner Hester Peirce, responds to the Commissioner’s call for public input on whether staking and liquid staking should be regulated under the federal securities laws. It argues that staking is fundamentally a technical process — not an investment activity — and urges the SEC to publicly acknowledge that staking and staking services do not constitute securities transactions.”
The crux of the argument, “in the letter, is that staking — whether direct or via a service, does not meet the legal definition of an “investment contract” under the Howey Test.”
The letter states that it does not meet the definition of “investment contract”:
Primarily because staking is not an investment, as stakers can withdraw tokens at any time. Moreover, “rewards are determined programmatically by the blockchain, not by the entrepreneurial efforts of the staking provider.” Finally, staking is not a security as it is like a “warehouse receipt,” representing ownership.
In addition, the letter “calls for the SEC to provide guidance on staking and staking services consistent with recent SEC statements, support responsible inclusion of staking features in exchange-traded products (ETPs), and avoid overly prescriptive rules that could freeze market structures and stifle innovation in the staking space.”
