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

• Lido and Rocket Pool staking tokens have been designated securities by the SEC
• The LDO price has dropped on the charts, while the RPL price has remained relatively stable

The United States Securities and Exchange Committee (SEC) is in the news again for a number of reasons. This time, it’s about designating Lido (LDO) and Rocket Pool (RPL) as securities.

SEC Strikes Again

The SEC considers the Lido and Rocket Pool staking programs to be securities because they work similarly to investment contracts. Investors deposit their ETH into a shared pool with the expectation of profits based on the efforts of the program managers, not their own actions.

The SEC’s classification of the Lido and Rocket Pool staking programs as securities could have several negative consequences. Registering and complying with securities laws can be expensive and time-consuming. Lido and Rocket Pool may face significant obstacles in meeting these requirements.

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

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

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

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

Déjà Vu

The SEC’s lawsuit against Ripple Labs provides valuable information about the potential consequences that could face Lido and Rocket Pool. In this case, the lawsuit caused the price of XRP to drop significantly as exchanges delisted it due to uncertainty about its legal status. In fact, LDO and RPL have already seen price declines following the SEC’s announcement. And a further decline is not excluded.

At the time of writing, LDO is down 18.17% in the last 24 hours. RPL, in turn, decreased by 1.08%.

---

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

---

It is important to note, however, that the SEC’s main argument in the Ripple case was that XRP itself was a security sold in an unregistered offering.

The case of Lido and Rocket Pool is slightly different. The SEC views their staking programs as investment contracts rather than tokens themselves, which could spell bad news for stETH and rETH. Therefore, the impact on LDO and RPL will remain largely uncertain for some time.