Staking Defense: Everstake Fights for Non-Custodial Future Against SEC

The world of digital assets is constantly evolving, and with that evolution comes the critical need for regulatory clarity. One area facing significant scrutiny is staking, particularly non-custodial staking. This mechanism, central to Proof-of-Stake networks, allows users to earn rewards by participating directly in network validation. But is it an investment contract or a technical function? This is the question at the heart of recent discussions between major industry players and regulators.

Understanding Non-Custodial Staking

Before diving into the regulatory debate, let’s clarify what non-custodial staking entails. Unlike custodial services where you hand over control of your assets to a third party, non-custodial staking allows users to retain full control of their private keys throughout the process. Users delegate their validation rights to a service provider, like Everstake, but the underlying digital assets remain in their personal wallet. The rewards are distributed directly by the blockchain protocol based on the network’s rules.

Everstake’s Staking Argument to the SEC

Everstake, a significant global provider of non-custodial staking services, recently engaged directly with the US Securities and Exchange Commission (SEC). Their goal: to explain why non-custodial staking should not be classified as a securities transaction under existing law. During their meeting with the SEC’s Crypto Task Force, Everstake representatives presented a clear case. They argued that the core function of non-custodial staking is technical, a fundamental mechanism for maintaining the integrity and operation of decentralized networks, similar to how mining works in Proof-of-Work systems. Users aren’t investing in Everstake; they are using Everstake’s infrastructure to participate directly in the network’s validation process while keeping control of their assets.

Applying the Howey Test to Non-Custodial Staking

A key part of Everstake’s defense centers on the Howey Test, the legal framework the SEC uses to determine if something is an investment contract and thus a security. Everstake contends that non-custodial staking fails each prong of this test:

• No Investment of Money in a Common Enterprise: Users delegate validation rights, not pooled funds, and retain asset ownership.

• No Expectation of Profits Solely from the Efforts of Others: Rewards are algorithmically determined by the network protocol, not solely from Everstake’s management efforts. While Everstake provides infrastructure, the yield is a function of network participation and asset value, not a return on investment in Everstake’s business.

Everstake highlights that the rewards come from network incentives and fluctuate based on market conditions, not based on the success or failure of their specific business operations in a way that would constitute a security.

Calls for Crypto Regulation Clarity

The meeting with Everstake is part of broader industry efforts to push for clearer crypto regulation in the United States. Everstake submitted a detailed letter to the SEC on April 8, 2025, expanding on their arguments and urging the agency to provide specific guidance that distinguishes non-custodial staking from custodial or liquid staking models, which may have different characteristics. They proposed criteria for exemption, focusing on user control, absence of pooled funds, permissionless unstaking, and the purely technical nature of the service provided. Other industry groups, like the Crypto Council for Innovation (CCI), have also formally requested the SEC issue clear rules around crypto staking services, emphasizing the need to foster innovation rather than stifle it through ambiguous enforcement actions.

The SEC’s Stance and Future Outlook

Despite these engagements and detailed arguments, the SEC has not yet issued definitive guidance on staking classification. Everstake noted that the agency made no specific commitments during their meeting but confirmed the SEC’s Crypto Task Force is actively gathering input from various stakeholders, including those involved in staking and broader blockchain infrastructure. The outcome of these discussions is crucial for the future of Proof-of-Stake networks and the participation of US individuals and businesses in the growing digital asset economy. Clear crypto regulation is vital for innovation and market certainty.

Conclusion

The dialogue between Everstake and the SEC represents a significant step in clarifying the regulatory status of non-custodial staking. Everstake’s argument that it is a technical network function, not a security, challenges the current uncertainty facing the industry. As the SEC continues to weigh input from various stakeholders, the crypto community awaits guidance that will shape the future landscape of staking and decentralized finance in the United States. The push for clear rules continues, aiming to allow this fundamental blockchain mechanism to operate without undue regulatory burden.