ADA Staking Is Not a Security, Declares Cardano Founder After Latest SEC Guidance

Charles Hoskinson, the founder and CEO of Cardano research and development arm Input | Output, has boldly stated that ADA staking is not a security

He made this known while reacting to a press release from the SEC’s Division of Corporation Finance about liquid staking activities.

The division defined liquid staking as the process of staking cryptocurrencies via a service provider or software protocol and receiving a receipt representing the staked assets and expected returns.

It is well known that Cardano has a built-in staking model, which is part of its consensus layer. This model allows ADA holders to earn rewards by delegating their tokens to staking pools within the network.

The ADA staking process does not meet the core criteria of the Howey Test, a longstanding standard used to determine whether a transaction constitutes a security. By staking ADA through Cardano’s model, users are neither “investing their funds” in a “common enterprise” nor “expecting profits solely from the efforts of others.”

Instead, they are simply delegating ADA to a staking pool and earning passive income for securing the network and validating transactions, not as a profit-sharing mechanism from an entity.

Therefore, Hoskinson is reassuring the Cardano community that native ADA staking does not fall under the SEC’s regulatory purview.

Project Crypto Already Yielding Results

For context, the SEC’s recent clarification is part of its recently launched Project Crypto initiative, which aims to modernize the rulebook of the SEC and transition the U.S. financial markets to an on-chain environment.

Less than a week after the SEC flagged off Project Crypto, Chairman Paul Atkins said the initiative is already yielding results, as evident in the clarification of liquid staking activities.

He reiterated that his leadership is committed to providing clear guidance on the application of federal securities laws to financial activities and emerging technologies.