IRS updates staking safe harbor for qualifying crypto trusts

The IRS has updated the conditions under which qualifying investment and grantor trusts can stake digital assets without losing those federal tax classifications. Revenue Procedure 2026-20, issued October 6, clarifies and supersedes the agency's 2025 staking safe harbor.

The procedure takes effect for tax years ending on or after October 6, 2026. It also gives existing qualifying trusts six months after that date to implement the requirements, including changes to their governing documents or operating procedures.

The central issue is the trust's legal and tax structure. An investment trust can risk reclassification if its activities give it the power to vary the investment of its holders. The new guidance specifies when authorizing and carrying out staking will not prevent an otherwise eligible trust from remaining an investment trust and grantor trust.

Eligibility is narrow. Among the conditions, trust interests must trade on a national securities exchange, staking disclosures must appear in an effective SEC registration statement, and the trust must have compliant written liquidity-risk policies. It may hold cash and a single type of digital asset on a permissionless proof-of-stake network.

The custodian controls the private keys, and the trust retains ownership of the assets while they are staked. The procedure also limits the trustee's activities and the arrangements used to meet redemptions. A transaction the trust treats as borrowing digital assets for federal tax purposes does not qualify as a contingent liquidity arrangement under this safe harbor.

Staking rewards must be additional units of the same asset in the same form. After expenses, an equivalent number of units must be distributed to holders, sold and distributed as cash, or handled through a combination of both, within 60 days after the end of the quarter in which the trust gains control of the rewards.

Trusts that remain compliant with the prior procedure can rely on it for up to six months after October 6. The revised safe harbor does not resolve every tax consequence of staking, forks or airdrops; it addresses the specified trust classifications and conditions.