To participate in staking, choose a method (solo validator, staking provider, exchange or liquid staking), decide who holds custody, check fees, lockups and slashing terms, confirm tax and regulatory treatment where you live, then monitor performance. Rewards are variable, paid in a volatile token, and never guaranteed.
Key takeaways
- Staking rewards come from issuance plus network fees; on Ethereum, about 34% of ETH was staked in mid-2026 at roughly 2.6% consensus yield.
- US regulators signalled in 2025–2026 that protocol and liquid staking are generally not securities transactions.
- In the US, rewards are generally taxable income when received (IRS Revenue Ruling 2023-14).
- Net return after fees, taxes and price changes is often far below the headline rate.
Staking can let holders of proof-of-stake tokens earn rewards for helping secure a network. But the choice of method changes who controls the assets, what can go wrong, and how much of the reward the investor keeps. This guide sets out a practical, step-by-step process. For how rewards are generated at the protocol level, see staking mechanisms and rewards.
Step 1: Choose a Staking Method
| Method | Who holds keys | Typical cost | Main risks |
| Solo validator | You | Hardware, time; 32 ETH minimum per validator on Ethereum | Operational errors, slashing, downtime |
| Non-custodial staking provider | You hold withdrawal keys; provider runs nodes | Commission on rewards | Provider performance and slashing |
| Exchange or custodial staking | The platform | Often 15–25%+ of rewards | Counterparty, freezes, platform terms |
| Liquid staking | Smart contract / protocol | Protocol fee ~10% of rewards | Smart contract risk; receipt token may trade at a discount |
| Institutional staking pool | Qualified custodian | Negotiated | See institutional staking pools |
Step 2: Decide on Custody
Custodial staking is simpler but exposes you to the platform’s solvency and policies. Non-custodial staking keeps control with you but requires secure key management. The right choice depends on the amount staked, your technical ability and any compliance obligations.
If staking through a third party, confirm whether your assets are segregated, whether they can be lent or rehypothecated, and how you get them back if the provider fails. Our guide to custody solutions covers the options.
Step 3: Understand Fees, Lockups and Slashing
- Commission: the share of rewards kept by the provider.
- Lockups and exit queues: unstaking can take days or, in busy periods on Ethereum, several weeks.
- Slashing: part of the stake can be destroyed for validator misbehaviour; check who bears that loss.
- Downtime: offline validators earn nothing and may pay small penalties.
- Liquid staking tokens: can trade below the underlying asset in stress.
Step 4: Check Regulatory and Tax Treatment
In the US, SEC staff statements in 2025 and a March 2026 SEC–CFTC interpretation treat protocol staking, including liquid staking, as administrative activity rather than securities transactions. Rewards are still taxable. Other countries apply their own rules, including licensing of staking service providers.
- US securities view: protocol staking (May 2025) and certain liquid staking arrangements (August 2025) were addressed by SEC staff (SEC); the 2026 joint interpretation described staking as administrative or ministerial (Baker Donelson).
- US tax: rewards are income at fair market value when you gain control of them; later sales may produce capital gains or losses.
- EU: crypto-asset service providers offering staking services fall under MiCA licensing.
- Reporting: keep records of each reward, its value when received and any fees.
Step 5: Estimate Your Net Return
Illustrative only. 20 ETH at $3,000 ($60,000) staked for one year.
| Item | Exchange staking | Liquid staking |
| Gross reward (assumed 2.8%) | 0.56 ETH | 0.56 ETH |
| Fee | 25% → −0.14 ETH | 10% → −0.056 ETH |
| Net reward | 0.42 ETH ($1,260) | 0.504 ETH ($1,512) |
| Tax at assumed 24% | −$302 | −$363 |
| After-tax yield on $60,000 | ~1.6% | ~1.9% |
| Added risk | Platform counterparty | Smart contract; token discount |
Both are small relative to ETH’s price swings; a 20% price fall would outweigh more than a decade of these rewards.
Free educational tool
Compare rewards with price scenarios
The Digital Asset Scenario Tool shows how price changes compare with staking rewards over different market outcomes.
Educational tool. Results are not investment advice.
Step 6: Monitor and Review
- Track validator or provider performance (uptime, missed rewards).
- Watch governance proposals that could change reward rates.
- Review provider terms and any regulatory changes at least annually.
- Keep tax records up to date throughout the year.
For Businesses: Staking-as-a-Service Considerations
- Written service-level agreements covering uptime and slashing liability.
- Segregation of client assets and clear custody arrangements.
- Licensing requirements in each jurisdiction where services are offered.
- Accounting treatment of staked assets and rewards.
Frequently Asked Questions
Is staking safe?
It carries risks: price declines, slashing, platform failure and smart contract bugs. Staking does not protect against falling token prices.
Can I unstake at any time?
Usually not instantly. Most networks have unbonding periods or exit queues; liquid staking tokens can be sold sooner, sometimes at a discount.
Work With Kenson Investments
Kenson Investments’ digital asset specialists focus on education around staking and compliance. Explore our DeFi consultation services or contact the team to learn more.
Disclaimer: The information provided on this page is for educational and informational purposes only and should not be construed as financial advice. Digital assets involve significant risk, including the possible loss of principal, and past performance is not indicative of future results. Always conduct thorough research and consult a qualified financial advisor before making investment decisions.
Digital asset regulation in the United States is still developing. Some areas, such as payment stablecoins, now have a federal framework, but comprehensive market-structure legislation has not yet been enacted. None of the information provided by Kenson LLC should be considered financial investment advice. Please consult your Registered Financial Advisor for guidance. Kenson LLC does not offer any products regulated by the SEC, including equities, registered securities, ETFs, stocks, bonds, or equivalents.
References
- SEC — Staff statement on certain liquid staking activities
- Fenwick — SEC staff statement on protocol staking
- Baker Donelson — SEC–CFTC joint interpretation
- The Block — Ethereum staking climbs to 34%
