The IRS safe harbor preserves favorable investment trust tax status for crypto ETPs that stake proof-of-stake assets like Ethereum and Solana.
Key Notes:
- SEC cleared operational aspects of crypto ETP staking from May through Sept. 2025, setting the stage for today’s IRS tax guidance.
- Trusts must maintain 85% of assets readily available for redemptions and distribute staking rewards to investors at least quarterly.
- Existing crypto ETPs have until Aug. 10, 2026 to amend trust agreements to adopt staking under the nine-month implementation window.
Treasury Secretary Scott Bessent announced on Nov. 10 that the IRS issued Revenue Procedure 2025-31, providing a tax safe harbor for crypto exchange-traded products to stake digital assets. The guidance completes a regulatory framework after the SEC cleared operational aspects earlier this year.
What the IRS Guidance Provides
Revenue Procedure 2025-31 establishes a safe harbor for trusts holding digital assets to maintain investment trust and grantor trust tax status while staking. According to the IRS guidance, trusts meeting specific requirements can stake assets without being reclassified as corporations for tax purposes.
The safe harbor applies to trusts holding proof-of-stake assets like Ethereum and Solana. Staking rewards can be distributed directly to retail investors. Bessent stated in an X post the guidance gives crypto ETPs “a clear path to stake assets and share rewards—boosting innovation and maintaining US leadership in digital assets.”
SEC Cleared Path from May to September
The IRS guidance follows SEC actions addressing securities aspects of crypto ETP staking. The SEC Division of Corporation Finance issued a Statement on Protocol Staking Activities on May 29, 2025. On July 29, the SEC approved in-kind creations and redemptions for crypto ETPs, enabling trusts to handle actual digital assets rather than cash-only transactions.
The SEC approved generic listing standards for commodity ETPs on Sept. 17, 2025, expanding the regulatory framework for digital asset products. Industry participants have been preparing for expanded ETP offerings, with issuers pursuing XRP ETF regulatory filings and institutional investors adjusting portfolio allocations across crypto products.
Requirements and Implementation Timeline
The revenue procedure requires trusts to maintain 85% of assets readily available for redemptions within one business day. Staking rewards must be distributed at least quarterly. Digital assets must be held by custodians who facilitate staking through unrelated providers.
Existing crypto ETPs have nine months to amend trust agreements, extending until Aug. 10, 2026. The guidance takes effect for tax years ending on or after Nov. 10, 2025. Major institutional investors like ARK Invest have increased crypto ETF holdings, signaling growing confidence in regulated digital asset products.
The framework positions the US to compete with Europe, where staking has been integrated into regulated ETPs since 2017, and Canada, which has permitted Ethereum ETF staking for years. Recent data shows significant institutional flows from Bitcoin and Ethereum ETFs, demonstrating sustained institutional demand for regulated crypto investment vehicles.
