The Evolution of Internet Regulation
As the internet emerged in the late 1990s, the rapid advancements in technology necessitated that regulatory bodies, engineers, and legal experts adapt together, often in real-time. Some regulators perceived the internet as a potential threat, while others viewed it as an opportunity. Those who made impactful changes were typically the ones who engaged directly with the technology, fostering a type of engagement characterized by technical knowledge rather than fear. This critical engagement allowed the internet to transition from a niche curiosity into an integral part of our infrastructure.
The Shift in Cryptocurrency Regulation
A similar evolution is now unfolding within the world of cryptocurrencies, particularly highlighted by the latest guidance from the Securities and Exchange Commission (SEC) regarding staking activities. This recent decision signifies a notable shift in the SEC’s perspective, suggesting an awareness of the distinctions between mere participation in a blockchain network and making an investment in securities.
In May 2025, the SEC set a precedent by explicitly stating that certain staking activities could be considered outside the realm of securities transactions. This was a groundbreaking acknowledgment that contributing to network security via staking, especially in a non-custodial manner, might not necessitate securities registration and compliance obligations typically associated with traditional investments.
This marks a critical inflection point in crypto regulation. Should staking be recognized merely as engagement in network infrastructure rather than speculative investment, it would align the United States with countries that have adopted a more nuanced viewpoint on crypto regulation.
The Howey Test and Staking
At the heart of this debate lies the application of the Howey test, used to determine whether a transaction qualifies as an investment contract. Critics have maintained that staking inevitably involves an investment in a collective venture with expectations of profits reliant on others’ efforts. This view oversimplifies the complexity of staking models, many of which function on decentralized principles without central custody or the promise of financial returns.
For instance, in many proof-of-stake systems, when token holders delegate their tokens to validators, they aid in securing the network rather than entering into a profit-earning agreement.
