FameEX Hot Topics | SEC Staff’s Liquid-Staking Guidance Sparks Regulatory Questions, Could Be Contested

The SEC’s recent staff guidance on liquid staking has sparked both optimism and concern within the crypto industry, highlighting the ongoing regulatory uncertainty surrounding this rapidly growing sector. While some view the nonbinding guidance as a positive step for institutional and retail adoption, others warn it leaves critical legal questions unresolved, potentially leading to future challenges.

Scott Gralnick, head of institutional staking at Marinade, cautioned that the guidance is not legally binding, stating, “First, these guidelines are not law… and they could be contested at some point.” He emphasized the need for the industry to continue working together to advocate for positive regulatory outcomes, particularly in light of upcoming market structure legislation that could be voted on soon.

A key aspect of the SEC’s statement is a disclaimer clarifying that it reflects the views of a division within the agency, not the overall stance of the SEC. The disclaimer also makes clear that the statement is not a formal rule, regulation, guidance, or statement from the SEC. According to sources familiar with the process, such staff guidance is not unusual, though it lacks a formal vote from the Commission. However, this doesn’t imply that the commissioners are unaware of the guidance.

One of the unresolved issues left open by the SEC’s statement is the taxation of rewards earned through liquid staking. This issue is particularly important for ecosystem participants, including both small and large stakers, who report to tax agencies. Evan Weiss, COO of Alluvial, noted that there are still questions about the timing of taxation, particularly whether taxes should be applied at the time of receipt or disposition of staking rewards.

Another significant concern is the grantor trust tax rules, which affect how assets are taxed when transferred after death. Weiss identified these rules as a major regulatory barrier to staking’s integration within exchange-traded funds (ETFs), calling it an unresolved matter that continues to impede broader adoption. These challenges underscore the need for ongoing legal review and advocacy, particularly in Congress, to ensure fair treatment for staking taxation.

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