Solana Stakeholders Urge SEC to Approve Liquid Staking for ETPs Amid Regulatory Uncertainty

Liquid staking allows investors to stake tokens while receiving a tradable derivative token in return, enabling them to participate in DeFi activities or loan markets without locking up assets. The move, advocates say, could enhance capital efficiency and improve investor access — but it comes with increased technical and financial risks.

In a joint letter to the SEC, the group argued that allowing liquid staking would reduce operational costs for ETPs and minimize tracking errors. The letter emphasized that without access to liquid staking, issuers may be forced into expensive and inefficient rebalancing during large-scale creations or redemptions of ETP shares.

“LSTs could be used to rebalance quickly in that scenario and could even be delivered or received in-kind by [authorized participants]…”

the letter stated.

Supporters also claim the addition of liquid staking could bolster network security, expand product offerings for investors, and generate more revenue opportunities for ETP issuers. As of now, at least nine Solana ETP applications are pending with the SEC.

However, the letter notably omits discussion of key risks tied to liquid staking, such as smart contract vulnerabilities, slashing events, and potential depegging of derivative tokens — risks the SEC may scrutinize in its ongoing evaluation.

The SEC has not issued formal guidance on liquid staking, although it has suggested that traditional staking mechanisms directly tied to consensus may not always qualify as securities offerings. The U.S. SEC also expressed significant compliance concerns regarding proposed ETFs based on Ethereum (ETH) and Solana according to a recent report by Decrypt.

Solana isn’t the only network in focus. Ether ETF issuers are also pushing for staking capabilities. Notably, Nasdaq filed an application on July 17 to enable staking in BlackRock’s iShares Ether ETF — following a similar move for Grayscale earlier this year.