The Proof of Stake Alliance (POSA), a nonprofit industry alliance, has published two white papers providing legal research & analysis of liquid staking tokens(LSTs).

The two whitepapers explained why LSTs for digital commodities should not be treated as securities, swaps, or taxable events, and also defined industry principles for responsible growth.

The research recommends that liquid staking tokens (LSTs) be named appropriately based on the nature of the relationship between the underlying staked token and the receipt token, and that LSTs should not be considered securities or swaps under U.S. federal laws. Additionally, the conversion of cryptoassets for LSTs should not be considered a taxable transaction for U.S. federal income tax purposes.

The papers provide a framework for meaningful legislative codification or elucidation and propose four industry principles aimed at improving the regulatory landscape surrounding liquid staking.

Here is a summary of whitepaper from POSA:

The papers represent the first public legal research and analysis of liquid staking tokens under U.S. federal securities, commodities, and tax law, with the aim to resolve key legal questions around the regulation & taxation of liquid staking in the U.S.

Developed by a working group of legal, industry, and policy experts and orgs, co-chaired by @alluvialfinance and @LidoFinance with @WillkieFarr, + more, the research reasons that:

1. It’s important to name tokens appropriately based on the reality of the nature of the relationship between the underlying staked token and the receipt token. Calling receipt tokens derivatives is inaccurate. We recommend using Liquid Staking Tokens (LSTs) moving forward.14164,463

2. LSTs for digital commodities should not be considered investment contracts or notes, and, therefore, should not be treated as securities under the U.S. federal securities laws.

3. LSTs should not be considered swaps under U.S. federal commodity law.

4. The conversion of cryptoassets for LSTs should not be considered a taxable transaction for U.S. federal income tax purposes.

By building on well-established case law and legal precedent, these papers provide scholarly legal research and analysis for the industry and lawmakers, offering a framework for meaningful legislative codification or elucidation.

We’ve defined four industry principles aimed at improving the regulatory landscape that surrounds liquid staking.

We urge the entire industry to self-regulate by adopting these principles to continue fostering liquid staking’s responsible growth: