U.S. Securities & Exchange Commission Commissioner Crenshaw disputes staff conclusion that protocol staking falls outside securities laws

U.S. Securities & Exchange Commission Commissioner Caroline A. Crenshaw published a response to a Division of Corporation Finance staff statement concluding that “protocol staking” and related third-party staking services on behalf of customers do not involve an investment contract and therefore are not securities subject to SEC jurisdiction. Crenshaw argued the staff’s position conflicts with the Howey test and recent court decisions in SEC staking-as-a-service cases, and does not provide a reliable framework for assessing when a staking service may be an investment contract. The statement points to prior SEC enforcement actions alleging staking-as-a-service programs were investment contracts under Howey and notes that two courts upheld the legal basis of those allegations, even though the Commission has since dismissed the actions. Crenshaw highlights that courts treated features such as pooling customer assets and providing technical infrastructure and expertise as entrepreneurial efforts that could enhance profit potential relative to staking directly, and contrasts that with the staff statement’s characterization of pooling, “slashing coverage,” and “early unbonding” as ancillary and non-managerial. She also criticises the staff’s use of terms such as “custodian” and assertions of continuous “ownership” as potentially implying securities-law protections that do not exist for staking customers, while noting risks including protocol “slashing,” protocol failure, hacking, and variability in user agreement terms. Crenshaw adds that, more than four months after the launch of the SEC Crypto Task Force, there is still no indication of whether, when, and how a new regulatory framework will be implemented, and she characterises the current approach as relying on staff statements, enforcement dismissals, and roundtables rather than formal rulemaking.