SEC Offers Clarity on Liquid Staking – Is Ethereum Set for an Institutional Supply Squeeze?

In a rare moment of regulatory clarity, the US Securities and Exchange Commission (SEC) has released a statement confirming that some types of liquid staking activity may not constitute securities offerings.

For the crypto industry and particularly Ethereum investors, this could prove a pivotal moment.

Liquid staking allows users to stake their Ethereum (or other Proof-of-Stake crypto assets) via a protocol or service provider, and in return, receive “staking receipt tokens”, tradable assets that represent their deposited ETH and any rewards earned. These tokens remain liquid and usable across DeFi platforms, effectively unlocking staked capital without giving up yield.

The SEC’s Corporate Finance Division acknowledged this structure in a recent Staff Statement, clarifying that depending on how the service is set up, liquid staking does not necessarily involve the offer or sale of securities.

This is an important distinction that removes one of the key regulatory clouds hanging over ETH staking and institutional participation in ETH-based products.

Just as the first round of Ethereum Spot ETFs go live (from BlackRock, Fidelity, and Grayscale), this guidance could open the door for these financial giants to participate in liquid staking, collecting staking rewards while holding ETH on behalf of investors.

This creates a dual benefit for institutional players:

1. Exposure to ETH price performance, and
2. Ongoing yield via staking rewards (potentially 3–5% annually).

With ETFs already hoovering up billions in ETH supply, allowing them to stake only strengthens the case for a supply squeeze in the months ahead.

The ETH locked in staking contracts currently sits at over 30 million ETH (~25% of circulating supply). If the SEC’s stance gives ETF providers confidence to stake client ETH, that figure could grow sharply, particularly if institutions like BlackRock begin leveraging staking to enhance fund performance.

And as these receipt tokens are often not sold (to avoid breaking 1:1 redemption parity), this could mean a practical removal of ETH from liquid circulation, tightening the supply side of the equation even further.

The implications are enormous:

• TradFi participants (pension funds, family offices, insurers) now have a path to earn ETH yield under a familiar, regulated ETF wrapper.
• Wall Street appetite for yield-bearing assets is strong, especially with inflation trending down and bond yields stabilising.
• ETFs could become the largest stakers of ETH, reducing available supply on exchanges and increasing price sensitivity to new demand.

If spot ETH ETFs combine price exposure + yield, they’ll become even more attractive to capital allocators, accelerating the institutionalisation of Ethereum.

With billions already flowing in and yields potentially on offer, the battle to dominate ETH supply may have just begun.

As regulators finally begin to provide clearer guidance on staking and crypto infrastructure, we may be entering a new phase, one where institutions are not just buying ETH, but staking it too.

For investors, this changes the supply-demand equation dramatically. As more ETH is locked away by ETF providers and staking platforms, scarcity becomes a key theme, and with it, price appreciation potential grows.

At Ainslie, we’re watching this evolution closely. Whether you’re holding ETH, BTC, gold, or silver, we’re here to help you navigate this new era of cross-asset investment and yield.