SEC Division of Corporation Finance Publishes Frequently Asked Questions on How Securities Laws Apply to Crypto Assets, Including Staking Certificates

SEC Staff FAQ Clarifies Crypto Asset Securities Law After March 17 Interpretive Release

According to Wu Shuo, the SEC Division of Corporation Finance published a FAQ on the application of federal securities laws to crypto assets, expanding on the classification and investment-contract analysis in the March 17 Interpretive Release.

Staking Receipt Tokens May Be Digital Tools or Digital Commodities

The document says a Staking Receipt Token can be treated as a digital tool when it serves only as evidence of holding a digital commodity that is not an investment contract. It may also be classified as a digital commodity when issued by a protocol-based Liquid Staking Provider.

Investment Contract Tests Narrow What Counts as Management Effort

For investment contract determinations, the staff says simply promoting existing functions of a crypto system, or making general claims about potential functions without referencing profit expectations, is usually not enough to amount to a promise of essential managerial efforts. Once a system reaches a functional state, activities such as maintaining, improving, enhancing the system or promoting network effects are also usually outside essential managerial efforts.

Repurchases and Promoter Status Depend on System State

For repurchases of non-security crypto assets, the FAQ says an issuer’s repurchase announcement usually does not constitute essential managerial efforts if the system is already functional. If the system is not yet functional and the issuer describes the repurchase as creating returns for token holders, that may amount to the relevant commitment. A trading platform offering a secondary market is considered a promoter only when it satisfies the definition of promoter under Securities Act Rule 405.

Guidance Has No Legal Effect

The staff says the FAQ reflects only the views of the SEC Division of Corporation Finance staff. It has no legal effect and does not create new legal obligations.