Education 5 min read

How To Make Sense Of US Crypto Staking Regulations In 2025

Regulatory uncertainty for staking rewards in the US revolves around their classification and taxation. While the IRS treats staking rewards as taxable income upon receipt, debates persist over whether they should be taxed only when sold or exchanged.

Crypto staking is one of the most critical components and backbone of blockchain transactions. For one, it’s the central process of verifying transactions on Proof-of-Stake (PoS) blockchains like Ethereum and Solana. Also, staking is one of the best ways to earn passive income in crypto.

However, there is a lot of regulatory uncertainty when it comes to staking rewards, especially in the US. There are certain tax obligation and legality concerns. When should staking rewards be declared? How much of it is actually taxable?

As of 2025, the regulatory space for staking rewards in the United States remains complex and evolving, presenting several uncertainties for participants in the PoS crypto ecosystem.

How does the SEC classify crypto staking rewards?

The US Securities and Exchange Commission (SEC) evaluates cryptocurrency staking activities to determine if they qualify as securities under federal law. Applying the Howey Test—a legal framework used to identify investment contracts—the SEC examines whether staking involves:

  1. An investment of money
  2. In a common enterprise
  3. With an expectation of profits
  4. Derived primarily from the efforts of others

When these criteria are met, the SEC may classify the staking activity as an investment contract, thereby subjecting it to securities regulations. This classification has significant implications for entities offering staking services, as they may be required to register with the SEC and comply with associated regulatory obligations.

For example, in February 2023, the SEC charged Kraken, a leading crypto exchange, for offering unregistered securities through its staking-as-a-service program. Kraken agreed to cease these services for the US clients and paid a $30million settlement.

It’s important to note that the SEC’s stance primarily targets staking services offered by intermediaries, such as exchanges that pool user assets and manage staking on their behalf. Solo staking, where individuals stake their own assets without intermediaries, may be less likely to fall under securities classification.

Given the SEC’s position, entities involved in offering staking services should conduct thorough due diligence and ensure compliance with securities laws to mitigate legal risks. Investors participating in staking should also be aware of the regulatory environment and consider the potential implications for their investments.

What regulatory uncertainty exists for staking rewards?

Tax treatment of staking rewards

The Internal Revenue Service (IRS) has maintained that staking rewards are taxable as gross income upon receipt. In Revenue Ruling 2023-14, the IRS clarified that taxpayers must report the fair market value of staking rewards as income when they gain dominion and control over the tokens.

However, this position has been contested. Notably, in the case of Jarrett v. United States, the taxpayer argued that staking rewards should be considered newly created property, akin to crops harvested by a farmer, and thus not taxable until sold or exchanged. The IRS disagreed, asserting that such rewards are taxable upon receipt.

As of 2025, the legal debate continues, leaving taxpayers uncertain about the definitive tax treatment of staking rewards.

Reporting requirements

In addition to taxation, reporting requirements for staking rewards are a source of uncertainty. The IRS has introduced new regulations mandating brokers to report sales and exchanges of digital assets on Form 1099-DA, with reporting to commence in 2026 for transactions occurring in 2025.

However, the applicability of these reporting requirements to staking rewards, especially those received through custodial accounts on cryptocurrency exchange platforms, remains unclear. This ambiguity poses challenges for taxpayers in ensuring compliance with reporting obligations.

Regulatory oversight and enforcement

The SEC has increased scrutiny of staking services, considering certain staking programs as unregistered securities offerings.

For instance, in 2023, the SEC charged Consensys Software for unregistered offers and sales of securities through its MetaMask Staking service. Such enforcement actions contribute to the regulatory uncertainty surrounding staking activities, as participants grapple with the implications of securities laws on staking services.

Future outlook

Looking ahead, the US Congress is expected to prioritize cryptocurrency legislation, including aspects related to staking, in 2025. Proposed acts, such as the Stablecoin Act and the Financial Innovation and Technology for the 21st Century (FIT21) Act, aim to establish regulatory frameworks for digital assets. However, until such legislation is enacted and corresponding regulations are implemented, significant uncertainties will persist regarding the regulatory treatment of staking rewards in the United States.

  1. 01.

    What is crypto staking?

    Crypto staking involves participating in a blockchain network by holding and ‘staking’ a certain amount of cryptocurrency to support network operations like transaction validation and security. In return, participants earn rewards, often in the form of additional cryptocurrency tokens. This process is integral to proof-of-stake (PoS) blockchain networks, where validators are selected based on the number of tokens they stake.

  2. 02.

    Is crypto staking legal in the US?

    Yes, crypto staking is legal in the United States. However, it operates within a complex regulatory framework. The SEC has scrutinized certain staking programs, considering them as unregistered securities offerings. For instance, in February 2023, the SEC charged Kraken for offering an unregistered staking program, leading to a $30 million settlement and the cessation of its staking services in the US.

  3. 03.

    Are staking rewards taxable?

    Yes, staking rewards are taxable in the United States. According to the Internal Revenue Service (IRS), staking rewards are considered gross income upon receipt. Taxpayers must report the fair market value of the rewards as income in the year they gain control over them. Additionally, if the staking rewards are later sold or exchanged, they may be subject to capital gains tax based on the appreciation or depreciation in value since the time of receipt.

Mohammad Shahid @ CryptoManiaks
Mohammad Shahid

Mohammad is an experienced crypto writer with a specialisation in cybersecurity. He covers a wide variety of topics spanning everything from blockchain and Web3 to the retail crypto space. He has also worked for several start-ups and ICOs, gaining insight into the mindset and motivation of the founders behind the projects.

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