Lido, Rocket Pool, and what the SEC’s latest lawsuit means for staking

  • Lido and Rocket Pool’s staking tokens labeled as securities by SEC
  • The price of LDO fell on the charts, while the price of RPL remained relatively stable

The United States' SEC (Securities and Exchange Committee) is once again in the news for the wrong reasons. This time, it is for labelling companies like Lido [LDO] and rocket pool [RPL] in the form of securities.

The SEC strikes again

Table of Contents

The SEC considers Lido and Rocket Pool's staking programs to be securities because they function similarly to investment contracts. Investors contribute their ETH to a shared pool, with the expectation that they will make a profit based on the efforts of the program's managers rather than their own actions.

The SEC's classification of Lido and Rocket Pool's staking programs as securities could have several negative consequences. Registration and compliance with securities regulations can be costly and time-consuming. Lido and Rocket Pool may face significant obstacles in meeting these requirements.

This lawsuit has increased fear in the market, which will potentially lead to a decrease in user participation and a decline in the value of their tokens (stETH and rETH).

In fact, data from Santiment showed that network growth associated with both stETH and rETH has declined significantly over the past few weeks. This suggests that the number of new addresses interested in both of these staking tokens has dropped significantly.

Both of these protocols could suffer if new users continue to lose interest in them.

Lido Staked ETH stETH 16.39.33 29 Jun 2024

Source: Santiment

Additionally, acting as security may limit Lido and Rocket Pool's ability to freely offer their services. They may face limitations on who they can offer their services to or how they structure their programs.

Deja vu

The SEC's lawsuit against Ripple Labs provides valuable insight into the potential consequences for Lido and Rocket Pool. In that case, the lawsuit triggered a significant drop in XRP's price as exchanges delisted it due to uncertainty over its legal status. In fact, LDO and RPL have already recorded a drop in price following the SEC's announcement. And, further declines are not at all impossible.

At the time of writing, LDO had declined by 18.17% in the last 24 hours. On the other hand, RPL declined by 1.08%.

Realistic or not, here is the market cap of LDO in terms of BTC

However, it is also important to observe that the SEC’s main argument in the Ripple case was that XRP itself was a security sold through an unregistered offering.

The case of Lido and Rocket Pool is a bit different. The SEC views their staking programs as investment contracts, not tokens, which could mean bad news for stETH and rETH. Thus, the impact on LDO and RPL will remain largely uncertain for some time.

Leave a Comment

“The Untold Story: Yung Miami’s Response to Jimmy Butler’s Advances During an NBA Playoff Game” “Unveiling the Secrets: 15 Astonishing Facts About the PGA Championship”