FameEX Hot Topics | SEC's Liquid-Staking Guidance Leaves Open Regulatory Issues, Potential for Disputes

The SEC’s recent staff guidance on liquid staking has stirred both optimism and concern in the crypto industry, reflecting the regulatory uncertainty surrounding this rapidly evolving sector. While some stakeholders view the guidance as a step toward broader institutional and retail adoption, others warn it leaves crucial legal questions unresolved, potentially setting the stage for future challenges.

Scott Gralnick, head of institutional staking at Marinade, pointed out that the guidance is not legally binding, cautioning that “these guidelines are not law… and they could be contested at some point.” He emphasized that the industry needs to continue collaborating and advocating for positive regulatory outcomes, particularly as market structure legislation is set to be voted on soon. This collaboration is seen as vital to ensuring a stable and supportive regulatory environment for the industry’s growth.

A central element of the SEC’s statement is the disclaimer that it represents the views of a division within the agency, rather than the SEC’s official position. This disclaimer clarifies that the statement is not a formal rule, regulation, guidance, or statement from the Commission itself. Although staff guidance of this nature is not uncommon, it lacks the formal vote of the Commission, which means that the guidance could be subject to revision or contestation in the future.

One of the key issues left unresolved by the SEC’s statement is the taxation of rewards earned through liquid staking. This issue affects both small and large stakers who report to tax agencies. Evan Weiss, Chief Operating Officer of Alluvial, raised concerns about the timing of taxation—whether taxes should be applied when staking rewards are received or when they are disposed of. This uncertainty is compounded by ongoing legal reviews and active advocacy at the congressional level, where industry players are pushing for fair taxation treatment to support the continued growth of staking.

Another significant hurdle remains the application of grantor trust tax rules, which dictate how assets are taxed when transferred after death. These rules are seen as a major obstacle to the integration of staking within exchange-traded funds (ETFs), as they complicate the tax treatment of staked assets. Weiss noted that this issue remains unresolved, further slowing the process of enabling widespread adoption of staking within mainstream financial products.

Disclaimer: The information provided in this section is for reference only and does not represent any investment advice or the official views of FameEX.