Is Staking in Crypto Gaming doomed?

As the fallout of FTX is still unwinding, regulation has begun being rolled out by authorities over the cryptocurrency and web3 industry. Something Sam Bankman-Fried was looking to do himself before being caught out last year by the law.

The SEC has cracked down on staking, a popular feature for crypto investors to earn “passive income” from their digital assets.

Putting crypto to work on the blockchain allows future growth and the verification of payments. In return receiving rewards after tokens are unlocked from the virtual vault.

Let’s look deeper into what the SEC put in place and what this means going into the future!


@ Staking Facilities

SEC crackdown on staking services

Popular cryptocurrency exchange and NFT marketplace Kraken have been at the forefront of the headlines. They were recently taken to court by the United States Securities and Exchange Commission (SEC) over their crypto staking services currently on their platform.

The jury reached a verdict that resulted in the staking services to be halted and for Kraken to fork out a whopping $30 million in penalty charges. Customers in the U.S will now be unable to stake their crypto and other digital assets via Kraken.

$30 million is not too much of a hefty fine for Kraken. However it is noted that terms of service for their customers was not clear. When moving assets over to Kraken, technically ownership is given to them.

“Whether it’s through staking-as-a-service, lending, or other means, crypto intermediaries, when offering investment contracts in exchange for investors’ tokens, need to provide the proper disclosures and safeguards required by our securities laws.” – Gary Gensler SEC Chairman

If for whatever reason Kraken was to go under and have to file for bankruptcy then the funds would be lost for investors. Something we have seen already with FTX.

Whilst regulation in the web3 is a much needed thing after the past 2 years, we feel this recent news is not what space needed. It has only been enforced on Kraken, but with how prominent they are there could be a ripple effect onto other exchanges like Binance and Coinbase.

The crypto communities response to the news

As expected all corners of the community have seen the recent headlines and have made their feelings heard.

Coinbase’s CEO Brian Armstrong believes this is not the correct step for the cryptocurrency industry. The overall banning of crypto staking for the everyday investor is not a good thing in their eyes.


@ Coinbase

He has also gone on to say that the enforcement of the regulation rather than the explanation of it is what is causing crypto related firms to take their business out of the United States of America.

In a response to the SEC Chairman’s tweet, Ryan Sean Adams pointed out some alternatives to the legislation set.

What does this mean going forward?

It is still early days and the announcement came as somewhat of a shock for investors and traders.

Whilst the court rulings will only affect Kraken, what’s not to say other exchanges will be affected?

Crypto gaming projects such as Axie Infinity and The Sandbox offer staking services for their respective coins and blockchains. Their platforms entitles players and investors to incredibly lucrative returns for staking their tokens.

Axie Infinitiy’s designated staking platform allows users to withdraw funds whenever they please also. This is a not so common feature for staking as you often have to lock your funds up for a set period of time.

We could maybe see the end of crypto game token staking as we know it. At the moment this is just speculation but it will be interesting to see how staking is affected in the wider crypto space.