In a scathing statement on Tuesday, SEC Commissioner Caroline Crenshaw slammed the agency’s new liquid staking guidance, accusing the Division of Corporation Finance of building “a wobbly wall of assumptions” that fails to reflect how the industry actually operates.
The guidance declares that liquid staking activities do not constitute securities transactions. This means participants would not be required to register such activities with the SEC. This move could ease regulatory pressure on blockchain networks and DeFi platforms offering these services.
However, Crenshaw believes this interpretation is dangerously misleading. Crenshaw said the Liquid Staking Statement builds one assumption on top of another, creating what she described as a shaky wall of facts disconnected from the realities of the industry.
She added that the guidance provides little clarity, lacks a legal foundation, and merely reflects the SEC staff’s views — not the Commission’s official position.
Crenshaw criticized the guidance for drawing “definitive declarations about how liquid staking works” without providing evidence or addressing the diversity of staking mechanisms across blockchain ecosystems. She warned that the guidance fails to offer meaningful direction for companies trying to stay compliant.
SEC’s liquid staking guidance sparks division
Earlier in the day, the SEC’s Division of Corporation Finance released a legal interpretation stating that liquid staking — a system that allows users to earn staking rewards while still being able to trade or move their staked tokens — is not a securities offering.
This clarification means platforms offering liquid staking services may not have to register with the SEC under current securities laws, potentially opening the door for broader innovation and user adoption.
The stance represents a continuation of the pro-innovation regulatory steps rolled out under the Trump-era Project Crypto, which promoted hands-off regulatory approaches in certain aspects of the crypto economy.
SEC Commissioner Hester Peirce also made a statement after the release from the agency, claiming that liquid staking is similar to a popular practice of leaving goods with an agent who gives receipts in return.
Peirce wrote that the Division’s statement makes it clear that, in its view, liquid staking activities tied to protocol staking do not constitute the offer and sale of securities.
But Crenshaw was quick to distance the full Commission from this interpretation. Crenshaw stated that the guidance holds no binding authority and does not represent the consensus of the Commission, either presently or in the future.
She argued that the legal conclusions within the document rest entirely on narrow, hypothetical assumptions. If a liquid staking product differs significantly from the outlined assumptions, the exemption likely wouldn’t apply.
Commissioner urges caution among liquid stakers
Crenshaw’s warning was stark: don’t rely on this guidance as a free pass. She noted that any entity whose liquid staking program differs in any way from the long list of assumptions in the Liquid Staking Statement should take caution, emphasizing “caveat liquid staker” — a Latin phrase meaning “let the liquid staker beware.”
She emphasized that entities operating in the liquid staking space are still at risk of enforcement, especially as the SEC continues its broader crackdown on crypto-related securities violations. Crenshaw has long voiced concerns that certain crypto products and platforms are sidestepping investor protections.
Her comments mirror a broader fissure at the Commission on how to approach fast-changing digital money systems. Some staffers and commissioners argue that the existing regime only needs to be tinkered with to suit itself to crypto; Crenshaw is advocating a stricter, more data-informed approach.
She argued that the rule cannot create regulatory certainty on unsupported assumptions. Some in the crypto world voiced a sense of hopefulness, however guarded. Perhaps most encouraging from a regulatory perspective, those in liquid staking saw enough in this statement to help them innovate without immediately worrying about regulatory hammer fallout.
Still, Crenshaw’s dissent raised red flags with legal experts, who said the dissent, read literally, means any departure from those assumptions in staff guidance could lead to an enforcement action.
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