Liquid Staking Is Not a Security: What It Really Means and How to Earn Tokens in 2025

Key Takeaways

The U.S. SEC said some crypto liquid staking practices are not securities offerings.
Clarification comes as institutional interest in liquid staking exchange-traded funds (ETFs) increases.
Legal clarity could unlock new financial products like liquid staking ETFs and drive broader adoption across Ethereum, Solana, and DeFi.
With $67B already locked in liquid staking and improving regulatory tailwinds, this model could become foundational to DeFi’s future.

Liquid staking is emerging as a key mechanism in the evolving crypto infrastructure. It allows users to earn staking rewards without giving up asset flexibility.

As platforms like Ethereum and Solana continue to expand their staking ecosystems, liquid staking protocols offer users a way to remain active in decentralized finance while supporting network security.

Recent regulatory developments have clarified its legal status, reinforcing its role in the broader DeFi environment. Nearly $67 billion in assets are currently locked in liquid staking protocols.

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What Is Liquidity Staking?

Liquid staking is a way to earn rewards on your crypto assets while still keeping them usable. It lets you “stake” your coins—locking them to help secure a blockchain network—and, in return, receive a token you can trade, lend, or use elsewhere in decentralized finance (DeFi).

Think of regular staking like putting money in a fixed deposit at a bank—you earn interest but can’t touch the money until the term ends.

On the other hand, liquid staking is like getting a deposit slip representing the money you’ve locked up. You can still use that slip as collateral or even trade it, without waiting for the term to end.

Regular Staking vs. Liquid Staking

Feature	Regular Staking	Liquid Staking
Asset Access	Locked during staking	Still accessible via a “liquid” token
Flexibility	Limited (unstaking delays)	High (can use in DeFi)
Rewards	Earned over time	Earned, plus token can earn more
Example	Ethereum staking via a validator	Ethereum staking via Lido (stETH)

In regular staking, your tokens are locked for a period—sometimes days, weeks, or even months.

In Ethereum, for example, unstaking was unavailable for long periods. With liquid staking, you receive a receipt token (like stETH from Lido or rETH from Rocket Pool) that represents your staked asset and still earns yield.

You can use that token across DeFi protocols—trade it, borrow against it, or add it to liquidity pools.

Real-World Examples

Ethereum: You can stake ETH through platforms like Lido (you receive stETH) or Rocket Pool (you receive rETH).
Solana: Liquid staking providers like Marinade or Jito allow you to stake SOL and get mSOL or JitoSOL, which you can use throughout the Solana ecosystem.
Lido: One of the most popular liquid staking protocols, operating on Ethereum, Solana, and other chains.
Rocket Pool: A decentralized Ethereum staking protocol offering liquid staking through rETH.

SEC’s New Clarification: Why Liquid Staking Isn’t a Security

In a recent staff statement, the U.S. SEC clarified that liquid staking, under certain conditions, does not involve offering or selling securities.

The statement applies to setups where users deposit crypto with a staking provider and receive a staking receipt token (SRT) representing their deposited assets and rewards.

These receipt tokens allow users to stay “liquid” (i.e., continue using their assets in DeFi) without altering the nature of the underlying staking.

According to the SEC, when staking is purely administrative and follows a set model, it doesn’t fall under federal securities laws.

Why SRTs Don’t Pass the Howey Test

The SEC used the Howey Test to assess whether liquid staking activities involve securities. This test checks if there is:

An investment of money.
In a common enterprise.
With an expectation of profit.
From the efforts of others.

Staking receipt tokens fail the last point, for several reasons:

Providers perform only ministerial tasks (e.g., staking, issuing tokens), not strategic management.
Rewards come from the protocol, not from the provider’s efforts.
Smart contracts, not intermediaries, often automate the process.
SRTs represent ownership, like a receipt—not a separate profit-generating instrument.

Why It Matters

This clarification has broad implications:

DeFi protocols (e.g., Lido, Rocket Pool) gain legal clarity if they adhere to the model.
Exchanges can better evaluate compliance risks.
Investors can use liquid staking with more confidence.

However, the SEC warned that if providers go beyond administrative roles, the activity could still be treated as a securities offering..

How the SEC’s Liquid Staking Ruling Impacts Investors, Ethereum, Solana, and DeFi

When appropriately structured, the SEC’s recent clarification that liquid staking is not a securities offering removes a key legal gray area.

This reduces regulatory risk for institutional investors and could facilitate greater participation in staking-related strategies, especially those offering liquidity through tokenized receipts.

With more precise boundaries, asset managers and custodians are more likely to engage with protocols that offer staking rewards without requiring asset lockups.

Ethereum, Solana, and DeFi Protocols Stand To Benefit

Protocols like Lido (Ethereum), Rocket Pool, Jito (Solana), and Marinade now operate with greater regulatory clarity—at least in the U.S. context.

The commission affirmed that platforms that limit their role to administrative functions (e.g., issuing staking receipt tokens, routing to validators) are not violating securities laws.

For Ethereum, which leads in total value locked (TVL) in liquid staking, the SEC’s stance strengthens the foundation for continued growth and DeFi integration.

Solana, where staking-based DeFi apps are expanding, also stands to gain as protocols attract more users who now face fewer legal uncertainties.

This move may also increase cross-chain adoption, with developers more confident about deploying liquid staking models across multiple ecosystems.

Opening the Door to Liquid Staking ETFs

The SEC’s clarity may set the stage for liquid staking ETFs, particularly for assets like Ethereum and Solana. Firms like VanEck, Bitwise, and Jito Labs have already advocated for such products.

With the SEC recognizing that properly structured liquid staking doesn’t involve securities, the chances of approval for staking-linked financial products—including ETFs—could rise.

That would give traditional investors a new avenue for crypto exposure, without needing to hold or stake tokens directly—potentially broadening access to DeFi yields via regulated instruments..

How To Earn Liquid Staking Tokens in 2025 (Step-by-Step)

Liquid staking lets you earn rewards on your crypto while keeping your assets liquid—usable in DeFi, tradable, or lendable. Here’s how to get started:

Step 1: Choose a Liquid Staking Protocol

Start by selecting a trusted liquid staking provider. Some of the most popular options in 2025 include:

Lido (Ethereum, Solana)
Rocket Pool (Ethereum)
Jito (Solana)
Marinade (Solana)
Frax Ether (Ethereum)

Step 2: Deposit Crypto Assets for Staking

Connect your crypto wallet (e.g., MetaMask, Ledger, Phantom) to the protocol’s site. Choose the amount of ETH, SOL, or other supported tokens you want to stake, then confirm the transaction.

For example, you’ll deposit ETH via the platform’s interface on Lido.
A small gas fee will apply (especially on Ethereum).

Step 3: Receive Liquid Staking Receipt Tokens

After your deposit, you’ll automatically receive a staking receipt token representing your share of the staked assets. These tokens also accrue staking rewards over time.

On Lido: stETH
On Rocket Pool: rETH
On Jito: JitoSOL

These tokens stay in your wallet and can be used like other crypto assets.

Step 4: Use Receipt Tokens in DeFi

You can now put your liquid staking tokens to work:

Earn extra yield in DeFi protocols (e.g., by providing liquidity on Curve or Balancer).
Use as collateral for borrowing on Aave or Compound.
Trade them on a decentralized exchange.
Hold them for passive rewards while remaining liquid.

Security Tips & Best Practices

To stake safely and avoid scams:

Always use official protocol websites (verify URLs).
Use a hardware wallet for larger amounts.
Be cautious with DeFi apps—only interact with trusted platforms.
Monitor gas fees to avoid overpaying.
Don’t share your private keys or seed phrase.

By following these steps, you can participate in staking without giving up access to your assets, opening the door to yield and DeFi flexibility in 2025 and beyond.

What Is the Difference Between Liquid Staking and Staking?

Liquid and traditional staking allow users to earn rewards by supporting the security and operation of a blockchain network. Still, they differ significantly in how users access and use their assets during the staking period.

In traditional staking, you lock your tokens—such as Ethereum or Solana—directly into the network or through a validator. Once staked, your assets become temporarily unavailable.

You can’t trade, move, or use them until you decide to unstake, and even then, most blockchains impose a waiting period (known as an unbonding period) that can last several days or weeks.

The tokens remain locked during this time, even though they’re no longer earning rewards. This approach is straightforward but limits flexibility.

Liquid staking, on the other hand, offers a more flexible alternative. When you stake through a liquid staking protocol like Lido, Rocket Pool, or Jito, you still contribute to the network’s security, but you receive a special token in return—such as stETH, rETH, or JitoSOL. These “receipt tokens” represent your staked position and continue to earn rewards.

The key difference is that you can use these tokens freely: trade them, lend them in DeFi, or use them as collateral, all while remaining staked in the background.

This means liquid staking lets you benefit from staking rewards without giving up access to your capital. It’s ideal for users who want passive income and decentralized finance participation.

Traditional staking, by contrast, suits those who are comfortable locking up their assets for a set period in exchange for simpler, direct returns.

Liquidity Staking vs. Pool Staking: Key Differences Explained

Liquid and pool staking are two popular ways to earn rewards from your crypto holdings, especially on proof-of-stake blockchains like Ethereum and Solana.

While both involve staking assets to help secure the network, they work in different ways—and offer various levels of flexibility.

What Is Pool Staking?

Pool staking allows you to stake your tokens by joining a staking pool, typically operated by a validator or a third-party service. Instead of running your validator node (which can be technical and costly), you contribute your tokens to a shared pool.

The operator handles the validation, and rewards are distributed proportionally to all participants.

You stay exposed to staking rewards.
Your tokens are locked and usually subject to an unbonding period before you can withdraw them.
This is a non-liquid staking method—your assets are tied up while staked.

How Liquid Staking Differs

On the other hand, liquidity staking goes a step further and, as seen before, shows several differences from pool staking.

When you stake through a liquid staking protocol like Lido, Rocket Pool, Jito, or Marinade, you still help secure the network but receive a receipt token (like stETH or rETH) in exchange.

This token:

Represents your staked position.
Accrues rewards.
Can be used freely—traded, lent, or deployed in DeFi applications.

You don’t have to wait through an unbonding period; if you want to exit, you can sell the liquid staking token on the open market.

Key Differences at a Glance

Aspect	Pool Staking	Liquid Staking
Asset Access	Locked during staking	Remains usable via receipt token
Exit Flexibility	Unbonding period required	Instant via trading token
DeFi Compatibility	Not compatible	Fully DeFi-compatible
Examples	Staking via exchange or validator pool	Lido (stETH), Rocket Pool (rETH), JitoSOL
Ideal For	Long-term holders seeking simplicity	Active users who want yield + flexibility

Which Should You Choose?

If you’re a long-term holder looking for simplicity and don’t need to move your assets, pool staking offers a straightforward way to earn rewards.

But if you want to stay liquid—able to use your assets in DeFi, trade them, or exit quickly—liquid staking offers far more flexibility.

As the staking ecosystem evolves in 2025, liquid staking continues to grow in popularity thanks to its ability to combine passive income with active use of your crypto.

Key Liquid Staking Risks to Be Aware of

While liquid staking offers flexibility and yield, it also comes with specific risks that investors and DeFi users should carefully consider.

Liquidity staking relies heavily on smart contracts, automated codes that govern staking, reward distribution, and receipt token issuance.

Funds could be lost or misallocated if there’s a bug, vulnerability, or exploit. Even well-audited protocols like Lido or Rocket Pool carry some risk, especially as DeFi remains a fast-evolving space.

Although the SEC recently clarified that some forms of liquid staking may not be treated as securities, that stance could shift.

If regulators later revise their policies or enforce stricter rules, platforms and users may face legal or compliance challenges, especially in the U.S. and other major jurisdictions. This could affect access to services or the liquidity of receipt tokens.

The value of your staked assets—like ETH or SOL—can fluctuate significantly. Even though you’re earning staking rewards, the market value of the underlying token may fall, reducing the overall value of your holdings.

In addition, receipt tokens (e.g., stETH) may trade at a discount during market stress, creating further risk if you need to exit quickly.

The Future of Liquid Staking: SEC’s Clarity Could Spark a $67B DeFi Boom

When appropriately structured, the SEC’s recent clarification that liquid staking doesn’t qualify as a securities offering could unlock significant growth across DeFi.

With nearly $67 billion in total value locked, liquid staking already plays a central role in ecosystems like Ethereum and Solana.

The SEC removes a key regulatory concern by confirming that protocols like Lido and Rocket Pool avoid securities classification if they limit their role to administrative functions.

This paves the way for greater institutional participation and opens the door to liquid staking ETFs, giving traditional investors access to staking yields without directly handling crypto.

More than just a yield tool, liquid staking enhances capital efficiency across DeFi, allowing users to earn rewards while still using their assets in lending, trading, and other protocols.