SEC Just Cleared Liquid Staking—Here’s Why It’s Huge for Ethereum and DeFi

Sean Williams
SEC

The headquarters of the US Securities and Exchange Commission (SEC) is seen in Washington, DC, January 28, 2021. - An epic battle is unfolding on Wall Street, with a cast of characters clashing over the fate of GameStop, a struggling chain of video game retail stores. Late January 27, 2021, the Securities and Exchange Commission said it was monitoring the activity. (Photo by SAUL LOEB / AFP) (Photo by SAUL LOEB/AFP via Getty Images)

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Key Takeaways:

  • SEC clarified liquid staking is not a securities offering, lifting a major regulatory hurdle.
  • Ethereum dominates the $66B liquid staking market, with Lido alone holding over $31B in ETH.
  • The move sets the stage for staking-enabled ETH ETFs and broader DeFi adoption.

The U.S. Securities and Exchange Commission (SEC) has issued a pivotal clarification stating that certain liquid-staking activities and their associated tokens do not fall under federal securities laws. This statement, backed by top officials and analysts, marks a turning point for the decentralized finance (DeFi) sector, which has long operated under a cloud of regulatory uncertainty.

Paul Atkins, SEC Chairman, emphasized the broader impact, saying the update from the SEC’s Project Crypto initiative “is already producing results for the American people.” The move comes shortly after the SEC’s broader crypto ETF framework was expanded, which included in-kind redemption mechanisms for Bitcoin and Ethereum funds.

Ethereum and Lido at the Heart of Liquid Staking

Liquid staking has become one of the most vital components of DeFi, with over $66 billion in total value locked (TVL), including $51 billion on Ethereum alone. Lido, the dominant protocol in this space, controls over $31 billion in staked ETH—highlighting Ethereum’s central role in the ecosystem.

The SEC’s latest stance removes a key hurdle for projects like Lido and may accelerate institutional involvement. Legal clarity could also pave the way for incorporating liquid-staking tokens into ETFs, boosting their liquidity and appeal to mainstream investors.

Also Read: Why the Ripple vs SEC Lawsuit Still Isn’t Over in August 2025

Long-Term Price Boost Despite Short-Term Dip

While Ethereum (ETH) is currently trading at $3,621.89—a 1.52% drop in the past 24 hours and a 5.17% decline over the week—the regulatory win is expected to drive long-term bullish sentiment. Nate Geraci, President of The ETF Store, noted that liquid-staking tokens can now help manage liquidity in spot ETH ETFs, removing the final major barrier for broader ETF inclusion.

The SEC’s liquid staking clarification is a watershed moment for Ethereum and DeFi. While ETH’s price reflects short-term market fluctuations, the long-term outlook appears increasingly favorable due to stronger institutional confidence and potential ETF integration.

Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.

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