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August 26th, 2025
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SEC Clears Crypto Staking. What It Means for Canada
Crypto Regulation | June 2, 2025
AI Image, SEC says crypto staking not a security
SEC Says Crypto Staking is Not A Securities Offering. Canada May Feel Pressure to Respond.
On May 29, 2025, the U.S. Securities and Exchange Commission (SEC) published new guidance, "Statement on certain protocol staking activities". The Corporation Finance Division said that staking crypto assets on proof-of-stake networks does not count as offering or selling a security under federal law.
The SEC guidance says these 3 models do not involve the kind of for profit structure that securities law covers, which shows how the SEC is now approaching proof-of-stake blockchain systems in practice: (1) staking by individuals (solo staking), (2) delegating staking rights to a non-custodial third party, and (3) custodial staking done by platforms that hold assets on behalf of users.
See: Canada Launches First Spot Solana ETFs With Staking
The Division stated, “Protocol staking does not involve entrepreneurial or managerial efforts by third parties." Meaning it does not meet the Howey Test which the SEC uses to determine what counts as an investment contract (or not).
Main Takeaways
- The SEC found that staking does not involve an expectation of profit based on others’ business efforts. Instead, rewards come from doing a technical job on the network. Staking is not an investment contract.
- If you run your own node or delegate your staking rights to another operator, this activity is not seen as a securities offering.
- Platforms can stake customer assets if those assets are not loaned, traded, or otherwise reused. Rewards must come from the protocol, not from the custodian.
- Features like early withdrawals, reward smoothing, and risk protection are considered administrative, and do not turn staking into a regulated activity.
- The SEC's approach offers a cleaner regulatory environment for staking models in the U.S. with guidance. So it removes core legal risks that have held back innovation and participation for years.
SEC Commissioners Split
Two SEC commissioners published separate statements that highlight the ongoing debate inside the agency.
Commissioner Hester Peirce (Crypto mom) supports the new staking guidance, saying it was long overdue and provides clarity that developers and users have been asking for:
“Today’s statement is a step in the right direction. Market participants have long sought guidance on staking, and this statement, although overdue, provides helpful clarity.”
“Staking is not a financial investment in a business venture. It is a technical function essential to many blockchain networks.”
Commissioner Caroline Crenshaw raised concerns over the staking guidance, warning that it may weaken protections for retail users and was issued without a formal public process.
“This Staff statement attempts to draw lines in a complex and evolving ecosystem without the benefit of a Commission vote or notice and comment. That is not the kind of transparency or rigor that investors or market participants deserve.”
Crenshaw also said staking programs can still involve risk, especially when intermediaries are holding customer assets.
“Even assuming the best of intentions, staking programs can pose meaningful risks, especially when intermediaries custody or manage assets.”
What This Means for Canada
Canadian regulators already have clear guidance on when staking may fall under securities law. According to CSA Staff Notice 81-336, the key trigger is custody. If a platform takes control of client crypto assets and stakes them on the client’s behalf, this may be considered a securities or derivatives activity and could require registration or compliance under existing rules.
See: OSC Opens Door for Tokenized Long-Term Funds
However by contrast, individuals who stake their own crypto assets directly or delegate staking rights without giving up custody are generally not subject to regulation, as long as the activity does not involve other investment features or representations.
“Depending on how it is conducted, staking of crypto assets may involve the issuance of a security or derivative and/or may raise other investor protection concerns.”
The U.S. position is different becomes it frames protocol staking itself as a technical service (even when done by custodians), and not an investment contract. At the end of the day, U.S. firms will now face less friction when offering staking services, while Canadian platforms still operate under stricter conditions if custody is involved.
The question now is whether Canada will maintain this more cautious approach or align with emerging U.S. standards. If many firms start moving operations to the U.S. to take advantage of fewer barriers, then regulators may feel pressure to change.
Guidance Is Informal and May Not Limit Legal Risk
Be aware that the guidance reflects the views of the SEC's Corporate Finance Division staff. It's not a new law or exempt from any activity from enforcement but it does offer helpful insight into current staff interpretations under existing U.S securities law (but it's not binding or the full Commission or court). It was raised that some common staking features like pooled assets, slashing protection, or enhanced reward mechanisms could till meet the criteria for an investment contract under Howey.
Further, the staff statement doesn't include liquid staking, restaking, or other models that add financial structuring, which is outside the scope of the guidance and could still raise regulatory concerns. See this A&O Shearman article for deeper analysis.
Why It Matters
Staking is one of the core functions of proof-of-stake blockchains, including Ethereum. For developers and users, the ability to stake without regulatory risk is essential to network growth and security.
See: Crypto.com Canada Gains Canadian Regulatory Approval
The SEC's staking guidance removes barriers, adds clarity, and will certainly give the market a boost. It will be interesting to see if staking adoption is slower here in Canada and if domestic platforms can compete or are overly restricted, due to the different approaches.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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