Wisconsin Legislators Debate Crypto ‘Staking’ Investments
Should it be legal? Backers cite possible gains. Bankers warn of fraud, consumer risks.
Cryptocurrency Medallions Alongside Wallet. Photo by CryptoWallet.com Images, (CC BY 2.0), via Wikimedia Commons
In the ever-changing cryptocurrency industry, states are scrambling to understand the risks and rewards. One example is playing out right now in Wisconsin over a practice known as “staking.”
Staking lets users lock their digital assets — like Bitcoin or Ethereum — onto the blockchain for a set period of time, with the hope of earning more rewards.
Current state law forbids the practice, defining it as a form of unauthorized securities trading. A Wisconsin bill would change that, exempting digital asset staking from that definition.
The bill has already passed the Assembly, and had a public hearing in the Senate, which could set it up for a vote before the full Senate later this month.
Supporters of the bill say staking offers individuals a different kind of investing and earning opportunity. Opponents say it would treat crypto differently than other financial investments, and would open an unregulated financial market that gives too much power to the crypto companies.
Tiara Nicole is a Milwaukee-based artist who has been advocating for this legislation. She said cryptocurrency has allowed her to have a source of passive income that supports her creative work.
“As an artist, sometimes that stable income can be kind of spotty at times,” Nicole said. “And I think me being able to secure or collateralize my cryptocurrency on (the blockchain) and receive a reward, and take that reward and buy art supplies or put it towards … a project that I’m doing, something meaningful, I think it would be awesome.”
But the bill is opposed by the traditional banking industry. At an Assembly committee hearing in early February, Lorenzo Cruz of the Wisconsin Bankers Association said the bill raises concerns about consumer protection by treating digital assets differently than traditional currencies.
“Staking activities can involve monetary transactions, third party service providers and expectations of return,” said Cruz. “Similar characteristics in traditional financial markets are subject to regulation to ensure transparency, manage risk and protect consumers.”
Cruz argued that the bill would deregulate the crypto blockchain in a way that unfairly distinguishes it from other financial services, and could make it harder for the state to respond as the technology advances, or to crack down on bad actors or fraud.
At a press conference in February, Rep. Adam Neylon, R-Pewaukee, who has championed other cryptocurrency legislation, argued that Wisconsinites lose out on millions of dollars by not having access to this process.
“Blockchain is a tool, much like AI, that’s going to be used by entrepreneurs and companies to kind of compete with larger companies and be able to get a lot more for … a lot less,” he said. “This is about just allowing entrepreneurs the tools that other states have, and also investors to reap the rewards for their proof of stake.”
The bill is also supported by the national blockchain exchange, Coinbase. Neylon and other backers argue that these companies could have more of a presence in Wisconsin if staking were allowed. He said Wisconsin is one of just four states that don’t allow the practice.
The proposed legislation comes as federal regulators have also grappled with how to treat staking. In 2023, under President Joe Biden’s administration, the U.S. Securities and Exchange Commission first argued that many staking processes are actually a form of securities trading, and should be regulated as such.
If staking were defined as a security at the federal level, then the platforms would be subject to stricter regulation, including providing investor disclosures.
For this reason, staking advocates define what stakers receive as “rewards,” rather than “returns.”
More recently, under President Donald Trump’s administration, the SEC issued new guidance that distinguishes staking from securities transactions.
And at the state level in Wisconsin, staking currently falls under a similar definition, enforced by the Wisconsin Department of Financial Institutions. That agency argues that staking programs are functionally unregistered securities, effectively banning them from the state.
But the state DFI takes its cues from state statutes, which are passed by legislators and signed by governors. Crypto advocates hope that if this bill gets signed into law, the industry could flourish.
“We want clarity, not confusion,” said Nicole, the Milwaukee artist. “When we don’t have clarity, we do not know how to build.”
Wisconsin lawmakers debate crypto ‘staking’ as bankers warn of fraud, consumer risks was originally published by Wisconsin Public Radio.
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