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What does stake have to do with our securities laws? That's S-T-A-K-E, not S-T-E-A-K.

In the crypto markets, there are various ways to validate data stored on crypto ledgers called blockchains. And one of these ways is called staking.

Investors lock up their tokens in escrow and help validate the next block of data. Some stakers are then rewarded with new tokens. Staking, though, can be complicated and time consuming and can take big upfront commitments of tokens. There’s also the risk that you won’t get new tokens even if you stake.

Thus, crypto entrepreneurs started offering what’s called “staking as a service.” No, not like the steak house. Basically, if you transfer your tokens to a staking as a service provider, they take control, possibly pooling your tokens with thousands or millions of others while promoting returns.

But here’s the rub: When a company or platform offers you these kinds of returns—whether they call their services “lending,” “earn,” “rewards,” “APY,” or “staking”—that relationship should come with the protections of the federal securities laws.

That means you, the investor, should receive important disclosures. For example, what do they actually do with your tokens? Are they really staking them? Are they lending, borrowing, or trading with them?

Are they co-mingling them with their other businesses? Where do the rewards come from? Are you getting your fair share? Are the underlying crypto protocols genuinely creating value on your investment, or are they just new tokens that dilute the value of ones you already have?

Remember, if you have a steak—that’s S-T-E-A-K—meant for two and cut it into three pieces, it’s still the same amount of steak. Unfortunately, because these staking as a service providers generally are not providing proper disclosures, there’s currently no reliable way, as an investor, to know the answers to these important investment questions.

Plus, when you sign on the dotted line or accept the terms of service, you are generally agreeing that placing your tokens with these providers may mean transferring your ownership to them.

There’s an expression in crypto: not your keys, not your crypto. You see, you're basically an investor in their platform. If it goes under—and we’ve seen plenty of that recently—you end up in line in the bankruptcy court. That's why it’s so important that these companies and platforms comply with the securities laws.

After all, the securities laws, regardless of what you think of steak or staking, they’re good for investors.