What have US regulators said about staking, and what are the red flags in a yield offer?

The 2023 Kraken settlement

On 9 February 2023, the SEC charged two companies known as Kraken with failing to register the offer and sale of their staking-as-a-service programme.¹ The SEC said customers sent crypto to Kraken to be staked, in exchange for advertised yearly returns of as much as 21%.¹

The SEC's release set out its concerns.¹

• It said customers who hand tokens to such a service lose control of them and take on the platform's risks, with very little protection.¹
• Its enforcement director said Kraken offered "outsized returns untethered to any economic realities", while keeping the right to pay no returns at all.¹

Kraken settled without admitting or denying the allegations.¹ On 13 February 2023 a federal court in California entered the final judgment. It ordered $30 million in payments and barred the companies from offering or selling securities through crypto staking services.⁷

Not everyone at the SEC agreed. Commissioner Hester Peirce dissented, arguing that using enforcement actions to tell people what the law is, in a new industry, is not an efficient or fair way to regulate.⁸

A separate SEC case, filed in November 2023, alleged that Kraken ran its crypto trading platform as an unregistered exchange, broker, dealer and clearing agency.⁹ The SEC dropped that case in March 2025, saying its decision was not based on any assessment of the merits.¹⁰

The 2025 staff statements

In 2025, staff in the SEC's Division of Corporation Finance published two statements.^2,3

• Protocol staking, 29 May 2025. The staff said they did not see protocol staking as the offer and sale of securities. That covered staking your own coins, using a third-party operator while keeping your keys, and some custodial staking.²
• Liquid staking, 5 August 2025. The staff took the same view of liquid staking and its receipt tokens, as they described them, unless the deposited coins are themselves part of an investment contract.³

Both came with limits.^2,3

• For custodial staking, the staff described coins that are not used for the custodian's business, and not lent, pledged or re-pledged (rehypothecated) for any reason.²
• A provider that guarantees or sets the amount of rewards is outside the liquid staking statement.³
• Neither statement covers restaking.^2,3
• Staff statements are not rules. Each says it has no legal force or effect.^2,3

Commissioner Caroline Crenshaw disagreed with both. She said two courts had upheld the legal basis of the SEC's earlier staking cases against Coinbase and Binance, though the SEC had by then dropped both; in her view, dropping them did not erase those court decisions.¹¹ She also said that no custody protections like those in securities law exist for customers of staking services.¹¹ Of the August statement, she wrote: "Caveat liquid staker."¹²

The 2026 Commission interpretation

On 17 March 2026 the SEC itself, not just its staff, issued an interpretation of how federal securities law applies to crypto assets. It took effect on 23 March 2026, and the CFTC joined it with guidance of its own.^4,13

• The same view. It covers protocol staking, including liquid staking and its receipt tokens. As described in the release, these activities do not involve the offer and sale of securities, which is the view the 2025 staff statements took.^4,2,3
• It replaces the staff statements. It says the Commission's views in the release replace any earlier statements by the SEC or its staff on these topics.⁴
• Similar limits. A custodian or liquid staking provider that guarantees or sets the amount of rewards is outside it, and it does not cover restaking.⁴
• Howey still applies. It says it does not replace the Howey test, which it calls binding legal precedent. Module 27 covers the release.⁴

When yield goes wrong

Module 20 tells the story of Celsius, a lending platform that offered "rewards" on deposited crypto and halted withdrawals in June 2022.¹⁴ One detail matters for this module. When its founder was sentenced in May 2025, after pleading guilty to fraud, prosecutors said his false claims covered how safe Celsius's yield-generating activities were, and whether its high rewards rates could last.¹⁴

The FSB described a pattern behind failures like this. Some lending platforms offered higher yields by promising instant withdrawals while putting deposits into assets that were slower to sell.¹⁵

Red flags

The SEC's investor website lists warning signs. Here they are, with two from ethereum.org and the FSB.^5,16,17,15

• Very high returns with little or no risk. The SEC's investor website calls this the hallmark of a high-yield investment programme scam. Its example: websites promising 30 or 40% a year, or more.⁵
• "Guaranteed" returns. Investor.gov says there is no such thing as high guaranteed returns, and every investment involves risk.¹⁸
• Overly smooth returns. Be sceptical of an investment that makes money regularly whatever the market does.¹⁶
• No clear source. If a staking yield is well above the network's own rate, ask where the extra comes from.¹⁷
• Instant withdrawals from slow assets. That mismatch can fail when many people want out at once, the FSB warns.¹⁵
• Trouble getting money out, or offers of even higher returns to stay put.¹⁶
• No registration. High-yield scams typically involve unregistered offerings.⁵