Lido, Rocket Pool, and what the recent SEC lawsuit means regarding staking

• Lido and Rocket Pool’s share tokens are classified as securities by the Securities and Exchange Commission
• LDO price is down on the charts, while RPL price remains relatively stable.

The SEC is in the news again for the wrong reasons. This time, the reason was to rank the likes of Ledo [LDO] And the rocket pool [RPL] As securities.

The SEC Strikes Again

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

The SEC’s classification of the Lido and Rocket Pool betting programs as securities could have several negative consequences. Registration and compliance with securities regulations can be expensive and time-consuming. Lido and Rocket Pool may face significant hurdles in meeting these requirements.

The lawsuit has created fear in the market, which could lead to lower user engagement and a drop in the value of their tokens (stETH & rETH).

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

If new users continue to lose interest, both protocols could suffer.

Source: Santiment

In addition, acting as collateral may restrict Lido and Rocket Pool’s ability to freely provide their services. They may face restrictions on who they can provide their services to or how they can structure their programs.

deja vu

The SEC’s lawsuit against Ripple Labs provides valuable insights into the potential consequences that Lido and Rocket Pool may face. In this case, the lawsuit caused a significant drop in the price of XRP as exchanges delisted it due to uncertainty over its legal status. In fact, LDO and RPL have already seen price drops following the SEC’s announcement. Further declines are not out of the question.

At the time of writing, LDO is down 18.17% over the past 24 hours. On the other hand, RPL is down 1.08%.

Whether it’s real or not, here’s the market cap of LDO in terms of BTC

However, it is also important to see that the primary argument made by the SEC 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 little different. The SEC views its staking programs as investment contracts, not the tokens themselves, which could mean bad news for stETH and rETH. Therefore, the impact on LDO and RPL will remain highly uncertain for some time.