A coalition of 30 crypto advocacy groups, led by the Crypto Council for Innovation, has reached out to the SEC to clarify regulations surrounding staking and staking services.
Coalition's Appeal to the SEC
In response to the SEC's recent call for public input regarding whether staking should fall under federal securities laws, the coalition submitted a joint letter arguing that staking should not be treated as a securities activity.
Arguments from the Coalition
In their letter, coordinated through the Proof of Stake Alliance, which includes companies like Coinbase and Ethereum Foundation, the group contended that staking is a 'technical process' aiding the security of proof-of-stake networks, rather than an investment arrangement. They noted that under the Howey test employed by the SEC for determining whether something qualifies as a security, staking does not entail users investing money with the expectation of profits derived from the efforts of others. Users maintain full ownership of their tokens and can withdraw them at any time.
Industry Impact and Future of Staking
The coalition urged the SEC to provide principles-based guidance akin to previous agency statements regarding proof-of-work mining. They advocated for not applying traditional securities laws and instead recognizing staking as a technical function. They proposed a set of practical standards for staking providers, including transparent disclosures, public audits of smart contract code, and clear user consent processes. They cautioned that without similar clarity in the U.S., innovation could shift overseas, disadvantaging American companies and users.
This coalition's appeal highlights the need for clear rules governing staking, which could facilitate the growth of the crypto industry in the U.S. and prevent potential business outflow to other jurisdictions.
