The U.S. Securities and Exchange Commission (SEC) is under fire from current and former officials following its recent shift in policy regarding cryptocurrency staking services. On May 29, 2025, the SEC’s Division of Corporation Finance issued new guidance stating that certain crypto staking activities on proof-of-stake blockchains may not be classified as securities, thus exempting them from registration under the Securities Act. This represents a significant departure from previous regulatory approaches.
Criticism from Former Officials and Commissioners
John Reed Stark, former SEC chief of Internet Enforcement, sharply criticized the new stance, arguing that it conflicts with prior federal court rulings in major cases against Binance and Coinbase. In those cases, courts allowed claims that staking products qualified as securities under established legal standards, particularly the Howey test. Stark described the SEC’s move as a “shameful abdication” of its investor protection duties and warned that it undermines the agency’s credibility.
Commissioner Caroline Crenshaw also voiced strong opposition, stating that the staff’s conclusions do not align with existing case law or the Howey precedent. She highlighted inconsistencies in the SEC’s treatment of digital assets, questioning how tokens like Ether (ETH) and Solana (SOL) can be considered non-securities for registration purposes but treated as securities in other regulatory contexts. Crenshaw characterized the approach as a “fake it till you make it” strategy that ignores current law in anticipation of future changes.
Background on Legal Cases and Regulatory Shifts
The SEC had previously filed lawsuits alleging that staking services offered by Binance and Coinbase involved unregistered securities offerings. While the Binance case was dismissed with prejudice in May 2025, preventing similar future claims, the Coinbase case was allowed to proceed in early 2024 but was also dismissed in early 2025 amid the SEC’s broader regulatory recalibration.
This new guidance is part of a wider deregulatory trend by the SEC, which includes closing investigations, dropping lawsuits, and engaging with industry stakeholders through roundtables. Some industry advocates have praised the guidance as a “major step forward” that recognizes staking as a fundamental blockchain function rather than an investment contract.
SEC’s 2025 Guidance on Crypto Tokens
Earlier in 2025, the SEC released comprehensive guidance clarifying how it applies the Howey test to crypto assets. The guidance emphasizes that tokens are likely securities if buyers expect profits primarily from the efforts of a centralized team. It introduces a three-pronged framework assessing initial sale context, ongoing use, and issuer control. Tokens like Ether post-Merge and stablecoins with transparent reserves are generally not considered securities, while governance or revenue-sharing tokens may still fall under securities laws.
Industry and Regulatory Implications
The SEC’s recent stance aims to provide regulatory clarity but has instead intensified debate over the consistent application of securities laws to digital assets. Critics argue that the new guidance creates confusion and undermines investor protections, while supporters view it as a pragmatic evolution toward clearer, more workable crypto regulation.
Commissioner Hester Peirce defended the SEC’s nuanced approach, emphasizing that whether a transaction is a securities offering depends on the nature of the deal, not solely on the asset itself. She noted that most crypto assets today are probably not securities but acknowledged the need for clearer guidance on transactions involving tokens.
This ongoing controversy highlights the challenges regulators face in adapting decades-old securities laws to rapidly evolving blockchain technologies and the crypto market’s unique features. The SEC’s shifting stance on staking services underscores the tension between fostering innovation and ensuring investor safeguards in the digital asset space.
