tl;dr
SEC Commissioner Caroline Crenshaw sharply criticized the agency’s new liquid staking guidance, calling it misleading, legally unfounded, and based on staff opinions rather than official Commission consensus. The guidance states liquid staking is not a securities transaction, potentially easing regu...
SEC Commissioner Caroline Crenshaw delivered a sharp critique of the agency’s new liquid staking guidance, accusing the Division of Corporation Finance of constructing "a wobbly wall of assumptions" that does not accurately reflect the industry's operations. The guidance asserts liquid staking activities are not securities transactions, relieving participants from SEC registration requirements and potentially reducing regulatory burdens on blockchain networks and DeFi platforms.
Crenshaw strongly disputates this view, calling the guidance dangerously misleading, lacking a solid legal foundation, and only representing staff opinions rather than the Commission's official stance. She criticized the document for making definitive claims about liquid staking without sufficient evidence and ignoring the diversity of staking methods across different blockchains. According to her, the guidance offers little meaningful clarity for companies aiming to remain compliant.
Earlier, the SEC’s Division of Corporation Finance declared liquid staking—a process allowing users to earn staking rewards while retaining liquidity of their tokens—not to be a securities offering. This move may foster greater innovation and adoption in the crypto space and aligns with previous pro-innovation regulatory efforts known as Project Crypto. SEC Commissioner Hester Peirce likened liquid staking to a common agent goods receipt practice, supporting the stance that it does not involve securities transactions.
Despite this, Crenshaw distanced the full Commission from the interpretation, emphasizing that the guidance lacks binding authority and does not reflect Commission consensus. She warned that the document’s legal conclusions hinge on narrow hypothetical assumptions, and any deviation by products from these assumptions could invalidate the exemption.
Crenshaw’s cautionary message to participants in liquid staking was clear: do not take the guidance as a free pass. She advised entities with programs differing from the stated conditions to beware, coining the phrase "caveat liquid staker." Her position highlights ongoing risk of enforcement amid the SEC’s intensified scrutiny of crypto-related securities violations.
This controversy underscores deeper divisions within the Commission over regulatory approaches to evolving digital assets. While some advocate modest regulatory adjustments, Crenshaw presses for a more rigorous and evidence-based framework. Although the guidance offers some regulatory breathing room for liquid staking innovation, Crenshaw’s dissent signals legal risks remain, particularly if actual practices diverge from listed assumptions, suggesting enforcement actions could follow.