IRS Expands Staking Safe Harbor for Crypto Trusts with New Guidelines

The Internal Revenue Service (IRS) has issued updated guidance allowing certain crypto trusts to engage in staking activities without jeopardizing their favorable tax status. The latest update, Revenue Procedure 2026-20, published on October 6, 2026, supersedes the earlier Revenue Procedure 2025-31 from November 10, 2025. This guidance clarifies how eligible investment trusts and grantor trusts can participate in proof-of-stake networks while maintaining their tax benefits.

Staking involves committing tokens to validate a blockchain and earn rewards. The IRS had previously been concerned that staking might count as active management, potentially disqualifying trusts from their pass-through tax treatment. The new guidance confirms that staking is considered a property-conservation activity, preserving the trust’s status under IRC §§ 671-677, provided they meet 14 detailed requirements.

Key requirements include listing the trust’s interests on a national exchange, holding only a single type of digital asset, and using qualified custodians. Additionally, the trust must have SEC-approved liquidity policies and adhere to strict rules for distributing staking rewards. The guidance applies to tax years ending on or after November 10, 2025, with a transition period for trusts that complied with the earlier version.

Existing trusts had a nine-month window to amend their governing documents to comply with the new rules, ending around August 10, 2026. The update primarily benefits issuers of exchange-traded products holding a single proof-of-stake asset, providing a clear compliance pathway. However, trusts that miss the amendment window or cannot meet all conditions remain outside the safe harbor, still facing potential classification risks.