Marcus Webb Fintech Engineer · Crypto Researcher since 2017

Marcus spent nearly a decade building payment infrastructure at fintech companies. He writes plain-English explainers focused on accuracy and honest risk disclosure.

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Key Takeaways

  • Staking is a way to earn rewards by helping verify transactions on a blockchain network — no mining equipment required.
  • On March 17, 2026, the SEC and CFTC jointly confirmed that staking major cryptocurrencies like ETH and SOL is NOT a securities transaction.
  • Staking rewards are still taxable income in the US — the new rules do not change your tax obligations.
  • The new guidance is an interpretation, not a law — it could still change until Congress passes the CLARITY Act.

What Is Crypto Staking, in Plain English?

When you deposit money in a savings account, the bank uses it to make loans and pays you interest in return. Staking works on a similar idea — but instead of a bank, you're helping run a blockchain network.

Many blockchains — including Ethereum, Solana, and Cardano — use a system called proof of stake to confirm transactions. Participants "stake" their crypto by locking it up as a kind of security deposit. In return, they get the chance to validate new transactions and earn rewards. Think of it like being a notary public: you vouch that transactions are legitimate, and you get paid a small fee for each one.

You don't need specialized hardware or an engineering degree. The main thing you need is the cryptocurrency itself and a way to participate — either by running your own validator node, using an exchange, or joining a liquid staking service.

Key term: A validator is a computer (or group of computers) that checks and confirms new transactions on a proof-of-stake blockchain. Stakers back validators with their crypto.

How Does Staking Actually Work?

There are three main ways everyday Americans participate in staking:

  • Solo staking: You run your own validator node and stake directly on the network. This requires a minimum deposit (32 ETH on Ethereum, for example) and some technical know-how. You keep all your rewards but take on all the responsibility.
  • Custodial staking: You hand your crypto to an exchange or custodian (like Coinbase or Kraken), and they stake on your behalf. Simpler, but you're trusting a third party.
  • Liquid staking: A service stakes your crypto and gives you a "receipt token" in return — for example, stETH on Lido. You can use that receipt token in other DeFi apps while your original crypto is still earning rewards. This is the most popular form: liquid staking accounts for about 31% of all staked Ethereum.

As of March 2026, roughly 35–37 million ETH — about 29–31% of all Ethereum — is staked, with a total value around $112 billion. On Solana, an impressive 68% of the supply is staked. The global staking market across all networks is now worth more than $245 billion.

Annual yields vary by network: Ethereum typically earns 2–3%, Polkadot around 3–6%, and Tezos 5–10%. Solana runs about 6–7% annually.

What Did the SEC and CFTC Decide in March 2026?

For years, the biggest question hanging over staking was whether it counted as an investment contract — a "security" in legal terms. If it did, platforms offering staking could face heavy regulation or even enforcement actions from the SEC.

On March 17, 2026, the SEC and CFTC issued a landmark joint interpretation that settled this question for most stakers. Here's what it said in plain terms:

  • Staking is not a securities transaction. The guidance covers solo staking, custodial staking, and liquid staking — all three are explicitly cleared.
  • 16 major cryptocurrencies — including Bitcoin, Ether, Solana, and XRP — are now officially classified as digital commodities, not securities. That puts them under CFTC oversight rather than SEC rules.
  • The SEC reasoned that when you stake, you're earning rewards for providing a validation service — not for someone else's management efforts. That distinction is what keeps it out of securities territory.
Why does this matter? Before this ruling, exchanges had been fined or threatened with lawsuits for offering staking services. The new guidance removes that uncertainty for the biggest cryptocurrencies — at least for now.

The ruling also paved the way for new investment products. BlackRock launched an Ethereum staking ETF (ETHB) on March 12, 2026 — just days before the guidance dropped. Solana staking ETFs from VanEck and Bitwise also got a green light.

What About Taxes? Staking Rewards Are Still Taxable

Here's the part many people miss: the new SEC/CFTC rules only address whether staking is a securities transaction. They do not change how the IRS treats your staking rewards.

Under current IRS guidance, staking rewards count as ordinary income the moment you gain control over them — meaning the first time you could sell, transfer, or spend those tokens. The IRS taxes them at their fair market value on that day, just like wages or freelance income.

So if you earn 1 SOL as a staking reward and SOL is worth $150 at that moment, you owe income tax on $150 — regardless of whether you sell it or hold it.

Proposed change: A bipartisan bill called the Digital Asset PARITY Act would give stakers a five-year option to defer taxes on rewards. This is not law yet, and there's no guarantee it will pass — but it's worth watching.

If you're staking and not tracking your rewards carefully, you could end up with a surprise tax bill. Consider using crypto tax software or consulting a tax professional who understands digital assets.

What Are the Real Risks of Staking?

Staking can sound like free money — you hold crypto, you earn rewards. But there are real risks worth understanding before you start.

  • Price volatility: Your rewards are paid in crypto. If the value of that crypto drops 40%, your "yield" may not cover your losses. A 6% annual reward means little if the coin falls 30% in value.
  • Lock-up periods: Some networks require you to lock your crypto for days or weeks before you can withdraw. During that time, you can't sell, even if prices crash.
  • Slashing: Validators who behave badly — or make technical mistakes — can have a portion of their staked crypto destroyed ("slashed"). If you're using a staking service, their mistakes could cost you.
  • Smart contract risk: Liquid staking protocols run on code. Bugs in that code could put your funds at risk. Even well-audited protocols have been exploited in the past.
  • Counterparty risk: If you use an exchange or custodian for staking, you're trusting that company to stay solvent and act honestly. Exchanges have failed before.
  • Regulatory risk: The current guidance is an interpretation, not a law. Rules could change with a new administration or court ruling.

Is This Permanent? The Role of the CLARITY Act

The March 2026 SEC/CFTC interpretation is a big deal — but it's not set in stone. Regulatory interpretations can be revised, reversed, or challenged in court. A future SEC chair could take a very different view.

What would make these rules permanent is an act of Congress. That's where the CLARITY Act (H.R. 3633) comes in. This bill would write the commodity-versus-security distinction directly into federal law, making it much harder to reverse.

Here's where it stands: The bill passed the House by a wide bipartisan margin of 294 to 134 in July 2025. It cleared the Senate Agriculture Committee in January 2026 and now awaits a markup vote from the Senate Banking Committee. If it passes both chambers and gets signed into law, the rules protecting stakers would be locked in.

Bottom line on permanence: The current guidance gives stakers meaningful protection today. But until the CLARITY Act becomes law, the legal landscape could still shift. Follow the bill's progress if you have significant staking activity.

Should You Consider Staking?

Whether staking makes sense for you depends entirely on your personal situation — your risk tolerance, tax situation, and how long you plan to hold crypto anyway.

A few practical questions to ask yourself before staking:

  • Do you already hold the crypto? If you're planning to hold ETH or SOL long-term regardless, staking may be a reasonable way to earn rewards on assets you weren't going to sell anyway.
  • Do you understand the lock-up terms? Make sure you know when and how you can access your funds.
  • Are you prepared for the tax paperwork? Staking rewards generate taxable events. Track every reward and its value when received.
  • Are you comfortable with the platform? Research any exchange or liquid staking service before depositing funds.

Nothing in this article is financial advice. Staking involves real risk, including the potential loss of your principal. But for Americans who were previously uncertain whether staking was even legal, the March 2026 guidance provides a much clearer answer: for the major cryptocurrencies, it is.

Disclaimer: This article is for educational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency assets carry risk. Always do your own research before making financial decisions.