What SEC’s Greenlight on Liquid Staking Means for DeFi and Crypto

Understanding the crypto space has often felt like walking on eggshells, never quite sure where the next regulatory step might land. That uncertainty has kept institutions cautious, dipping their toes in rather than diving deep.

But things are shifting. With the U.S. federal government’s GENIUS Act laying down clearer rules for stablecoins, retail investors and institutions alike are beginning to take a harder look at what’s possible under this new framework.

And now, the U.S. Securities and Exchange Commission (SEC) has added its efforts to that momentum by clarifying where liquid staking stands in all of this.

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What Exactly Did the SEC Say?

For years, most aspects of crypto have been in a grey area without regulation, but that is beginning to change with the U.S. Securities and Exchange Commission (SEC) clarifying that certain cryptocurrency liquid staking activities do not constitute securities offerings, a notable step in the agency’s ongoing effort to provide clearer guidance on digital asset regulation.

This means that, say you put your ETH or SOL into a platform and get a token back that shows how much you staked plus whatever rewards you earn, and the platform is only acting as an administrator, not promising extra returns or doing anything with your tokens behind your back, then it’s not a securities deal. It’s just staking, plain and simple.

Why This Matters for ETFs

The timing couldn’t be better. Institutional appetite for liquid staking ETFs is heating up, with firms like Jito Labs, VanEck, and Bitwise already pushing for Solana-based funds that integrate staking rewards. Meanwhile, liquid staking itself has exploded into one of crypto’s biggest subsectors, with nearly $67 billion locked across protocols, according to DeFiLlama. Ethereum alone makes up about $51 billion of that total—a sign of how much demand there is for staking exposure without giving up liquidity.

Until now, buying a crypto ETF came with the roadblock of not being able to buy crypto ETFs directly with your crypto. This meant you had to sell the crypto for cash, then use that cash to buy ETF shares. That process generated a lot of capital gains for fund managers, which eventually cut into the returns people saw.

With the SEC’s new allowance for in-kind creation, that changes. You can now move your crypto, say ETH or SOL, directly into an ETF without selling it first. No need for unnecessary conversions or extra tax hits. It’s cleaner and more efficient for everyone involved.

Even better, these ETFs can now pass staking rewards back to investors. So if you’re holding a Solana or Ethereum ETF, you’re no longer limited to price exposure; you can actually earn staking rewards without being a validator or figuring out the complexities of DeFi.

What It Means for DeFi and Crypto

This new guidance gives everyone a clearer way forward. For DeFi projects, it shows how to create liquid staking tokens without turning them into securities, keeping it straightforward and transparent.

For institutions, it opens the door to offer staking rewards inside regulated products, which means ETFs and funds can now include yield without breaking the rules. And for everyday investors, it makes staking easier, safer, and less of a tax problem.

However, the rules still apply. If any firm starts promising guaranteed profits, combines staking with risky lending, or takes too much control of users’ assets, they will have to answer to the SEC.

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Conclusion

With the GENIUS Act laying the foundation and the SEC now clarifying where liquid staking stands, the crypto space feels less like walking on eggshells and more like building on solid ground.

Staking can stay what it was meant to be as a way to support networks and earn rewards, while ETFs and institutional products finally catch up to the way the market works.