- Around 30 crypto organizations push SEC to recognize staking as infrastructure, not a financial product.
- CCI argues staking doesn’t meet Howey criteria, since rewards come from software, not third-party actions.
- Canada and UK lead in staking rulemaking, increasing calls for the U.S. to clarify its stance.
The push for regulatory clarity is improving, with nearly 30 crypto advocacy groups recently coming together this week. These groups are now urging the US Securities and Exchange Commission (SEC) to draw clear boundaries around staking.
The movement is spearheaded by the Crypto Council for Innovation (CCI) and its affiliated Proof of Stake Alliance (POSA), both of which are seeking to make sure that staking is treated as the technical function that it is. Rather than being treated like an investment contract, which is governed by securities regulations.
Investment Contract or Technical Service?
The CCI noted in a letter to SEC Commissioner Hester Peirce that staking is what holds most of the decentralized internet together. This debate is based on the argument of whether or not staking meets the definition of an investment contract, and is therefore a security under the Howey Test.
According to the CCI, staking does not meet the four main requirements of the Howey Test. According to the Howey Test requirement, an asset can only be considered a security if it includes an initial financial investment, a joint venture, as well as an expectation of profits. Finally, these profits must come directly from the work of other people. As such, the CCI maintains that staking does not satisfy these conditions and is therefore not a security investment.
Stakers retain complete control over their tokens, and the returns they earn come directly from the blockchain protocol—not from the actions or efforts of other individuals. This view closely mirrors the SEC’s earlier stance on Proof-of-Work (PoW) mining, where it determined that mining activity does not constitute a securities transaction. Based on this precedent, the coalition argues that staking should be treated similarly under regulatory frameworks.
Industry Leaders and Senators Join the Call
The CCI’s letter isn’t just symbolic, it has backing from major signatories including companies like Kraken, a16z (Andreessen Horowitz), Consensys, Lido, Galaxy, Figment, Polychain, Paradigm, and more. These companies have a shown an interest in the staking ecosystem and believe that the regulatory uncertainty is holding innovation back. The letter also pointed out the industry’s growing support in the political space.
In February, a group of U.S. senators formally urged the SEC to revisit its stance on staking and Proof-of-Stake (PoS) networks. Their request focused on the growing interest in exchange-traded funds (ETFs) that aim to incorporate staking components. To date, the SEC has not granted approval to any ETF proposals that involve staking features.
In fact, it recently delayed a decision on Grayscale’s application, which proposed this particular staking service. So far, Bloomberg analyst James Seyffart believes that approval could come as soon as May. However, the lack of official guidance is a major source of frustration.
Technical Function, Not Passive Income
One of the major messages in the CCI’s letter is that staking should not be viewed through the same lens as passive income investments. Stakers are actively involved in the operation of the blockchain, and help to validate transactions, keep the network safe and even participate in governance in some cases. Making this distinction is important, because treating staking as a security would mean that providers have to go through extensive and often harsh disclosure requirements.
The CCI argues that these frameworks were designed for financial instruments like stocks and bonds, not decentralized technical operations. The letter also pointed out that other jurisdictions are making progress on this front. Canada and the United Kingdom have both started to craft more precise regulations around staking. These examples could serve as models for the U.S., in its mission to balance innovation with investor protection.