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

• Staking Tokens from Lido and Rocket Pool Have Been Labeled as Securities by the SEC
• LDO price has dropped across the charts, while RPL price has remained relatively stable.

The US Securities and Exchanges Committee (SEC) is in the news again for the wrong reasons. This time, it’s for labeling Lido (LDO) and 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 their ETH to a shared pool, hoping to make profits based on the efforts of the program managers, rather than their own actions.

The SEC classifying 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 could face significant hurdles in meeting these requirements.

The lawsuit has fueled fear in the market, potentially leading to a drop in user participation and a decrease in the value of their tokens (stETH and rETH).

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

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

Source: Santiment

Additionally, operating as a security company could limit Lido and Rocket Pool’s ability to freely offer their services. They could face limitations on who they can offer their services to or how they structure their programs.

Already seen

The SEC’s lawsuit against Ripple Labs provides valuable insight into the potential consequences that Lido and Rocket Pool could face. In this case, the lawsuit triggered a significant drop in the price of XRP, with exchanges delisting it due to uncertainty over its legal status. In fact, LDO and RPL have already seen price drops following the SEC’s announcement. And further declines are not really out of the question.

At the time of writing, LDO was down 18.17% in the last 24 hours. The RPL, on the other hand, fell by 1.08%.

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

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

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