SEC Staff Split on Staking Tokens Highlights Exit Risks for cbETH and stETH Holders
SEC guidance separates token types but leaves exit risks clear
A September 25 staff FAQ from the U.S. Securities and Exchange Commission (SEC) draws a line between two types of staking tokens. The document suggests that a receipt proving ownership of a deposited asset might be considered a "digital tool." In contrast, a token issued by a protocol-based liquid-staking provider might be classified as a "digital commodity." The SEC staff did not specifically name Coinbase's cbETH or Lido's stETH in this classification.
Despite the regulatory distinction, the practical reality for holders remains unchanged. An investor can sell a liquid-staking token on a market while the underlying Ethereum (ETH) stays locked in the staking contract. Neither the SEC guidance nor the token issuers guarantee that a holder can immediately convert their token back into unstaked ETH or sell it at the exact value of the underlying asset.
How the SEC defines a staking receipt
The SEC staff describes a qualifying receipt as proof that an asset was deposited and that the owner keeps control. Under this definition, the entity issuing the receipt cannot lend, pledge, or use the deposited asset for other purposes. This description applies to the specific scenario in the FAQ and does not automatically set a new custody rule for every token sold as liquid staking. The staff notes that a token's value may depend on market supply and demand, which is why the word "may" is used when discussing classifications.
Different paths to withdraw funds
- Coinbase states that cbETH represents ETH staked through its platform, including rewards minus fees. To get unstaked ETH, an eligible holder must "unwrap" the token first, which returns staked ETH, followed by a separate unstaking step to receive spendable ETH.
- Lido's stETH operates via a protocol withdrawal queue. Holders must wait for their turn in the queue to redeem their tokens for ETH.
- Selling either token on a secondary market depends entirely on finding a buyer. The price received may differ from the current value of the underlying ETH.
What is confirmed about the process
The SEC staff FAQ confirms that a receipt can evidence ownership without transferring control of the asset to the issuer. It also confirms that a protocol-issued token may function as a digital commodity. For users, the confirmed facts are that selling a token transfers ownership rights to the buyer, but does not instantly release the underlying ETH. Coinbase requires a specific account status and eligibility to unwrap tokens, while Lido relies on a system-wide queue for withdrawals.
Where uncertainty remains
The SEC staff explicitly avoided classifying cbETH or stETH as securities or commodities by name. The FAQ does not determine if either product meets the criteria for a "digital tool" or a "digital commodity" in practice. Additionally, while the documents outline the steps to withdraw, they do not specify how long the unstaking process takes for either platform or guarantee that liquidity will always be available for immediate sales.
Implications for token holders
This split in classification highlights that holding a liquid-staking token does not guarantee immediate access to the underlying funds. Investors relying on these tokens for quick exits face two distinct hurdles: the operational delay of unwrapping or waiting in a queue, and the market risk of selling the token itself. The ability to exit depends on the specific terms of the platform used, not just the existence of the token.
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Newisty Editorial Team covers technology, cryptocurrency, digital products, online platforms, developer tools and the wider digital economy. Our content is researched from official sources, company announcements, public documentation, market data and other primary or reputable sources. Articles are reviewed and edited before publication for clarity, accuracy and useful context.