IRS issues guidance on digital asset staking safe harbor for trusts

The IRS has given crypto trusts something they have wanted for a while: permission to stake without blowing up their tax status.

The agency’s staking safe harbor began with Revenue Procedure 2025-31, issued on November 10, 2025. Revenue Procedure 2026-20, published on October 6, 2026, now supersedes it and clarifies how eligible investment trusts and grantor trusts can participate in proof-of-stake networks and still keep their favorable tax treatment.

What the safe harbor actually covers

Staking means committing tokens to help validate a proof-of-stake blockchain in exchange for rewards.

The problem for trusts was structural. Investment trusts get their tax treatment partly because they are passive vehicles. The IRS has long been wary of trusts holding a “power to vary investments”, meaning the ability to actively shuffle what they own in pursuit of profit.

Staking raised an awkward question. Did choosing to stake, and collecting rewards, count as that kind of active management? If so, a trust could lose its classification and the pass-through treatment that comes with it.

The IRS answer, through this guidance, is no, provided the trust plays by the rules. Compliant staking is treated as a property-conservation activity. That framing keeps it on the passive side of the line, preserving investment-trust status and grantor-trust status under IRC §§ 671–677.

Fourteen requirements, no shortcuts

The safe harbor is not a blanket pass. Trusts must satisfy 14 detailed requirements to qualify.

Among them, the trust’s interests must be listed on a national exchange. The trust must hold a single type of digital asset, so no mixing tokens in one vehicle.

Assets must sit with qualified custodians. The trust also needs liquidity policies approved by the SEC, which ties the tax treatment directly to securities regulators’ oversight.

Staking rewards come with strict distribution rules as well. The trust cannot simply pile up rewards and treat them as a war chest.

Timelines and transition rules

The guidance applies to tax years ending on or after November 10, 2025, with October 6, 2026 also marking a relevant effective date under the updated procedure. A transition period covers trusts that complied with the earlier version.

Existing trusts were given a nine-month window following the original release to amend their governing instruments. That window ran until approximately August 10, 2026.

The amendment period mattered because many trusts were drafted before anyone expected the IRS to bless staking. Their governing documents may have barred it outright or failed to address it. The nine months gave them room to rewrite the rulebook without forfeiting eligibility.

What this means for investors and fund sponsors

The clearest beneficiaries are issuers of exchange-traded products holding a single proof-of-stake asset. They now have a defined compliance pathway, which could make staking a more standard feature of these vehicles rather than a legal gray zone.

There are limits worth noting. The single-asset requirement means multi-token baskets do not fit neatly inside this safe harbor. The dependence on SEC-approved liquidity policies also means the tax benefit only works if securities regulators keep cooperating on the product side.

Trusts that missed the amendment window, or that cannot meet all 14 conditions, sit outside the protection. For them, staking still carries the classification risk the guidance was designed to resolve.