Curriculum·J313 Mining, Validating, and Running Infrastructure·about 32 min
Delegation and staking services
By the end of this lesson you can
- →Separate the three routes into a validator and name what each one delegates
- →Compute the commission drag over a realistic holding period
- →Find the point at which running it yourself beats paying somebody to
- →Price the risk that a service is removed by somebody other than the service
Junior · enrolled learners
This lesson opens with Kraken and the SEC, 9 February 2023.
- What happened
- The SEC announced settled charges against Payward Ventures and Payward Trading, together Kraken, for failing to register the offer and sale of their crypto asset staking-as-a-service program, in which investors transferred assets to Kraken for staking in exchange for advertised annual returns of as much as 21 percent. The SEC's complaint alleged that by April 2022 US investors had over $2.7B of crypto assets in the program, and that Kraken had earned about $147M of net revenue from it since it began, more than $45M of that attributable to US investors. Kraken agreed to pay $30M and to cease offering or selling securities through staking services, without admitting or denying the allegations. The same day Kraken announced it would end on-chain staking for US clients and automatically unstake their enrolled assets, with staked ether to follow after the Shanghai upgrade.
- The decision point
- The SEC did not allege that rewards went unpaid. Its charge was registration, and the complaint's other allegations were about disclosure, including how many tokens Kraken held back unstaked as a liquidity reserve. The program ended because a regulator and the operator settled that question, and US clients' positions were unstaked as a result. When you delegate, the counterparty is not only the party that can perform badly. It is the party whose permission to exist you are relying on.
- Recorded loss
- $30,000,000
What you will be able to answer
- →What are the three routes?
- →What does a 15 percent commission cost?
- →Where does solo beat custodial?
- →What risk has no price attached?
Orientation and Year One are open: anyone can read them without an account. From Year Two onward the lessons are for enrolled learners, because progress through the later years only means anything if it is tracked against a record.
It is free. We do not sell the list and there is nothing to buy at the end of it.
Sources and review
- https://www.sec.gov/newsroom/press-releases/2023-25
- https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-25.pdf
- https://blog.kraken.com/post/17619/settlement
- https://www.sec.gov/newsroom/speeches-statements/statement-certain-protocol-staking-activities-052925
- https://www.cnbc.com/2023/02/09/crypto-exchange-kraken-settles-with-sec-over-us-staking-operation.html
- https://www.velaw.com/insights/a-stake-in-the-ground-what-the-secs-settlement-with-kraken-tells-us-about-the-future-of-crypto-regulation-and-enforcement/
- https://web.archive.org/web/20210624013557/https://stakehound.com/blog-post/fireblocks-eth-2-key-management-incident/
Confidence high·Volatility high·Reviewed 2026-08-06·Owner unassigned
Contested
The SEC figures are allegations in a settled action with no admission or denial, and they come from the complaint rather than the press release: over $2.7B of US investors' crypto assets in the program by April 2022, and about $147M of net revenue to Kraken since the program began in December 2019, of which more than $45M was attributable to US investors. They are reported here as what the regulator asserted rather than as established facts, and the argument does not depend on either number. The unstaking of US clients' assets is from Kraken's own announcement of the same day, not from the SEC's terms.
Whether staking-as-a-service is a securities offering remains contested and jurisdictional, and the enforcement posture has shifted since 2023: on 29 May 2025 the SEC's Division of Corporation Finance stated its staff view that protocol staking, including custodial arrangements meeting its conditions, does not involve the offer and sale of securities. That is a staff statement and not a rule. Per J311-03's rule, this lesson states the position and its instability rather than predicting where it settles.
The economics in part two carry forward J313-02's stated assumptions, being a 3.0 percent solo reward rate, ETH at $3,000, a $1,200 machine over five years and power at $0.15 per kilowatt hour, with a 3.2 percent gross rate and 15 percent commission used for the service comparison. None are current figures.