SEC staff split on staking tokens highlights exit risks

On Sept. 25, staff in the SEC’s Division of Corporation Finance published an FAQ distinguishing qualifying staking receipts from protocol-issued liquid-staking tokens. The staff wrote a qualifying receipt for a digital commodity may function as a “digital tool,” while a token issued by a protocol-based liquid-staking provider may be a “digital commodity.” The guidance framed those labels as conditional.

The FAQ defines a qualifying receipt as evidence that an asset was deposited while ownership remained with the depositor and control did not pass to the issuer. Under that description, the issuer cannot transfer, lend, pledge or otherwise use the deposited asset or expose it to third-party claims.

The staff emphasized the word “may” and characterized the FAQ as a staff view that does not create new legal obligations or definitively classify individual products.

Coinbase’s terms state cbETH represents ETH staked through Coinbase, including accrued rewards less fees or slashing. Coinbase holds the staked ETH on behalf of token holders and says selling or transferring cbETH transfers the underlying ownership interest and the contractual right to redeem. An eligible holder must unwrap cbETH through Coinbase, which requires a Coinbase account in good standing and may be subject to geographic limits and processing delays. Unwrapping returns the staked ETH position; the holder must then request unstaking and wait for the Ethereum protocol’s unstaking process to complete. Coinbase warns cbETH’s market price can diverge from ETH and does not guarantee liquidity or a buyer.

Lido’s protocol issues stETH when users deposit ETH into its smart contract. To reclaim ETH through the protocol, a holder submits a withdrawal request that enters a queue; exits are processed according to queue capacity and validator exit availability. Lido’s disclosures note protocol withdrawals can be slowed by queue limits or validator actions and that slashing or other adverse events can reduce the ETH returned. A holder can also sell stETH on secondary markets for faster liquidity if a buyer is available; when market liquidity is strained, spreads, slippage and discounts to ETH can widen.

Both operational models expose holders to exit risks. A transferable liquid-staking token allows a holder to move an economic interest but does not guarantee immediate conversion into unstaked ETH or preservation of the underlying position’s exact value. Market sales depend on available buyers and prevailing prices; custodial or protocol redemption routes can impose eligibility checks, processing delays, queues and exposure to slashing or smart-contract risk.

The staff’s distinction focuses on features relevant to securities-law analysis. The FAQ does not name or classify cbETH or stETH and does not resolve product-level legal questions such as who retains legal ownership of deposited ETH, who operates the redemption mechanism, which asset is returned first, or what delays and losses may occur. An earlier staff statement from August 2025 described liquid-staking tokens as transferable evidence of deposited assets and accrued rewards but did not address arrangements that involve restaking or provider-controlled rewards.