SEC Clarifies Liquid Staking Tokens May Not Be Securities: What It Means for DeFi

In a groundbreaking update for the crypto world, the U.S. Securities and Exchange Commission (SEC) clarified that liquid staking tokens (LSTs)—like stETH, rETH, and others—may not be considered securities, as long as specific conditions are met. 

This announcement, made on August 5, 2025, marks a major regulatory shift that could boost DeFi adoption and open the door for institutional entry into liquid staking markets.

Here’s what the new SEC guidance means, how it affects liquid staking protocols, and why this ruling matters for the future of decentralized finance.

What Are Liquid Staking Tokens (LSTs)?

Liquid staking allows users to stake their crypto assets via a third-party provider and, in return, receive staking receipt tokens. These LSTs can be traded, used in DeFi applications, or redeemed later for the original stake plus rewards.

Instead of locking assets away in staking contracts for months, users gain liquidity and flexibility—combining staking rewards with access to DeFi markets.

SEC Guidance on Liquid Staking: Key Highlights

The SEC’s recent clarification brings long-awaited regulatory certainty. Here are the main takeaways from the August 2025 statement:

Administrative-Only Services Are Not Securities

If a provider simply stakes user funds and returns staking tokens—without added investment management, pooled profits, or entrepreneurial promises—then those tokens do not qualify as securities.

This means that most protocol-based liquid staking services (like Lido or Rocket Pool) can operate without triggering SEC oversight—provided they keep things ministerial.

No Mandatory Registration for Most LSTs

As long as the staking receipt tokens:

• Represent only the user’s original staked assets,
• Don’t offer profit-sharing,
• And don’t grant governance or business control rights,

They can be issued and traded without SEC registration. This opens legal access to LSTs for both users and platforms.

Not All Protocols Are Covered

The ruling is fact-specific. It doesn’t extend to:

• Complex DeFi structures like restaking protocols (e.g., EigenLayer),
• Bundled products that include profit-sharing,
• Or protocols where the issuer plays an active managerial role in generating returns.

Projects must examine whether they meet the “administrative-only” standard.

Read more: CFTC and SEC Launch Joint 'Crypto Sprint' to Implement Trump Administration’s Digital Asset Strategy

DeFi Impact: Regulatory Clarity Encourages Growth

This announcement is widely viewed as a regulatory green light for compliant DeFi staking projects. Here’s why it matters:

Institutional Access Just Got Easier

Investors and financial institutions have long been wary of LSTs due to unclear U.S. regulations. Now, with guidance in place, more traditional players can confidently engage in staking-based DeFi.

Developers Have Room to Innovate

Without the fear of triggering securities laws, developers can build LST-integrated products—such as lending platforms, ETFs, or liquid staking vaults—with more certainty and creative freedom.

Market Already Booming

Liquid staking is already a massive market, with over $67 billion in total value locked (TVL) across leading platforms like Lido and Rocket Pool. Expect further expansion and new entrants thanks to legal clarity.

Traditional vs. Liquid Staking After SEC Update

Final Thoughts

The SEC’s updated stance on liquid staking tokens offers a new layer of legitimacy to one of DeFi’s fastest-growing sectors. While not a free-for-all, the guidance provides a well-defined regulatory perimeter for compliant liquid staking services.

Projects that follow the outlined administrative model can now grow with reduced legal uncertainty. For users, it means safer participation in liquid staking—and for DeFi as a whole, a powerful tailwind toward mainstream adoption. 

Read More: Details of the SEC's Crypto Project Launch – Today’s Focus

FAQs

Are liquid staking tokens considered securities now?

According to the SEC, not necessarily. If the staking service is purely administrative and doesn’t involve managerial profit efforts, the tokens are not classified as securities.

What is an example of a compliant LST?

Tokens like stETH (by Lido) and rETH (by Rocket Pool) are likely covered by the guidance, assuming they maintain a non-managerial, proof-of-stake relationship with users.

Does this apply to restaking protocols?

No. The SEC explicitly noted that complex restaking structures (e.g., EigenLayer) are not covered under this ruling and may still face securities scrutiny.

Can developers now launch LST platforms without SEC registration?

Yes, if the staking process is administrative and does not involve pooling investor money for managed profits. The ruling offers a path for safe, compliant launches.

What’s the impact of this for DeFi investors?

This guidance reduces legal uncertainty, encourages more innovation, and makes LSTs more attractive to both retail and institutional investors looking for yield and liquidity in DeFi.