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Particularly as the movement of cryptocurrency markets from fringe speculation, bordering on untouchable, to the present day landscape of widening corporate embrace is being hastened along by an unlikely ally: the U.S. Securities and Exchange Commission’s (SEC) corporate finance division.
In a recent detailed statement, the SEC’s Division of Corporation Finance concluded that under a very specific set of facts liquid staking arrangements, and the “staking receipt tokens” they produce, do not involve the offer or sale of securities. Securities classification triggers a host of registration, disclosure, and compliance obligations.
Upwards of 154 public companies have committed $98.4 billion of their treasury dollars for crypto purchases just this year alone. For chief financial officers (CFOs) and treasury managers weighing whether, or how, to put idle crypto assets to work, that distinction over staking from the SEC matters.
“It is the Division’s view that participants in Liquid Staking Activities do not need to register with the Commission transactions under the Securities Act, or fall within one of the Securities Act’s exemptions from registration in connection with these Liquid Staking Activities,” the SEC wrote.
But the catch is that the SEC’s green light applies only under a highly controlled set of assumptions. Step outside those parameters, and you may be in regulatory gray, or even red, territory.
After all, for finance teams, and as SEC Commissioner Caroline Crenshaw wrote in a dissenting opinion, a truer reality may be “caveat liquid staker.”
Read more: 4 Questions CFOs Need to Ask as Wall Street Embraces Stablecoins
Liquid staking has exploded in popularity since Ethereum’s transition to proof-of-stake and the subsequent unlocking of staked ether in 2023. It offers token holders a way to participate in network staking rewards while maintaining liquidity. Instead of locking up assets for months, participants deposit their tokens with a “liquid staking provider” and receive a newly minted “staking receipt token” in return.
The SEC’s Aug. 5 statement defines two core models, protocol-based providers and third-party custodians or service providers.
Protocol-based providers are ecosystems where smart contracts automatically handle custody, staking and receipt-token issuance, with no human intermediary; while third-party custodians or service providers represent entities that hold the assets, arrange for staking (directly or via a node operator) and issue the receipt tokens themselves.
From a corporate perspective, the key takeaway is that under either model, if the provider’s role is strictly “administrative or ministerial” and not managerial, the arrangement likely falls outside the definition of a security.
Still, for CFOs, that translates to heightened due diligence: you can’t just take a provider’s word that their service is “compliant with the SEC’s view.” You need independent verification of their operational model against the Division’s fact pattern. Risk-focused assessments, for example, can include things like code audit reviews, capital adequacy analysis, operational resilience, regulatory posture, custody model details, insurance layers (e.g., to cover loss from bugs or hacks) and historical uptime.
Ultimately, any highly interconnected financial infrastructure can carry compounding risks. Unlike traditional assets, crypto systems, once thought to be relatively siloed, are increasingly webbed via staking aggregators, synthetic token markets, cross-chain bridges and lending desks. A shock to one node could propagate across counterparties, protocols and liquidity pools, impacting treasury liquidity just as it might in legacy systems.
See also: Stablecoin Sandwiches? Here’s What CFOs Need to Know About Crypto Jargon
At its essence, liquid staking permits crypto holders to deposit their tokens (for example, Ethereum) with a staking provider. In return, they receive synthetic derivatives, often ERC-20 tokens, that represent a claim on the staked assets plus accrued rewards.
Users continue earning staking yields while retaining market exposure via the synthetic variant. In practical terms, liquid staking combines two traditionally opposed functions: earning staking rewards (normally requiring lockups) and maintaining liquidity for trading, lending or other corporate purposes.
For CFOs and treasurers, liquid staking need not be a leap of faith. It can be a calibrated experiment.
“Ethereum isn’t a static asset. It’s programmable infrastructure,” Dave Merin, co-founder and CEO of The Ether Machine, told PYMNTS. “Ethereum is the largest proof-of-stake network by a wide margin. That scale means more yield opportunities, a broader security moat, and a stronger economic flywheel.”
“We think we can generate 2x the yield of an ETF, conservatively,” Merin added. “And when you layer on things like restaking or engaging in DeFi, we think we can deliver a vastly superior product. Our team knows these protocols intimately. We’re not guessing, we’re building the infrastructure that others will later follow.”
