SEC liquid staking guidance clears ‘last hurdle’ for staking in spot crypto ETFs

Fresh US Securities and Exchange Commission (SEC) staff guidance on liquid staking is stoking expectations that US regulators will soon allow staking within spot crypto exchange-traded funds (ETFs).

Co-founder of The ETF Institute Nate Geraci called the guidance “the last hurdle” before the SEC can approve staking in spot Ethereum (ETH) ETFs.

Furthermore, he noted that liquid staking tokens (LSTs) would be used to manage liquidity inside funds, a key concern for the Commission.

His comments echo the SEC Division of Corporation Finance’s view that, under the structures described, liquid staking activities do not involve offers or sales of securities.

Additionally, staking receipt tokens (SRT) function as receipts for the underlying assets rather than as securities themselves.

Industry read-through

LSTs allow funds to keep staked exposure liquid, maintaining on-chain staking rewards while holding a transferable receipt token that can be used for portfolio operations, collateral, or redemptions without fully unwinding staking positions.

Lucas Bruder, CEO of Jito Labs, said in a note that the statement showed an “incredibly nuanced understanding” of current liquid staking arrangements. 

He added:

“We will see expanded use for LSTs in both traditional and novel financial instruments, including ETFs.” 

Regarding the impact of the decision, Bruder is looking forward to fully-staked ETFs via LSTs coming to market.

The CEO of Jito Labs and other industry players met with the SEC in mid-February to discuss staking rules for ETFs. 

According to the meeting logs, LSTs were discussed to address the agency’s concerns about redemption timing. The participants highlighted that LSTs within an ETP framework avoid direct involvement in the staking process, streamlining the process.

The liquid staking statement builds on a May 29 staff view that other forms of protocol staking likewise do not require registration, and that features such as early withdrawals or slashing protection do not by themselves convert staking into a securities offering. 

However, the SEC emphasized that its view applies to administrative and ministerial provider roles and specific fact patterns. Consequently, arrangements that go beyond those boundaries may be treated differently.

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