Image credit: Shutterstock
- The IRS updated its crypto investment trust safe harbor through Revenue Procedure 2026-20 to allow proof-of-stake asset staking without losing grantor trust status.
- The October 6 guidance establishes detailed rules requiring exchange-traded trust interests, SEC disclosures, unrelated staking providers and 60-day reward distributions.
- The guidance does not resolve broader federal income tax questions regarding staking rewards, forks or airdrops.
The U.S. Internal Revenue Service has updated its safe harbor for crypto investment trusts, allowing qualifying vehicles to stake proof-of-stake assets without losing their treatment as investment trusts and grantor trusts for federal income tax purposes.
Revenue Procedure 2026-20, issued Oct. 6, replaces guidance introduced in November 2025 and sets more detailed rules covering custody, liquidity, staking providers and the distribution of rewards.
Trusts Can Stake While Keeping Grantor Trust Treatment
The safe harbor applies to state-law trusts that otherwise qualify as investment trusts and grantor trusts. Eligible vehicles must hold cash and a single type of digital asset operating on a permissionless proof-of-stake network.
Trust interests must trade on a national securities exchange, while required disclosures about staking must be filed with the Securities and Exchange Commission.
Trusts may use multiple custodians, while each staking provider must be unrelated to the trust and sponsor.
New Rules Give Trusts More Liquidity Flexibility
The IRS clarified that qualifying trusts do not need to keep every token staked at all times. Assets can remain unstaked to meet redemption requirements, cover expenses, handle creations and redemptions or respond to network and security risks.
Trusts may also establish contingent liquidity arrangements, although the safe harbor excludes transactions treated as borrowing digital assets for federal tax purposes.
The trust must also be indemnified against slashing caused by events reasonably within the staking provider’s control or ability to prevent.
Staking Rewards Must Reach Holders Within 60 Days
Rewards must be paid in the same digital asset held by the trust. After expenses, the tokens or proceeds from selling them must be distributed proportionally to trust holders within 60 days after the end of the quarter in which the trust gains control of the rewards.
The guidance does not resolve broader federal income tax questions involving staking rewards or other crypto events such as forks and airdrops.
Existing Trusts Get Six Months to Meet Revised Safe Harbor Rules
Trusts already relying on the 2025 safe harbor have six months from Oct. 6 to amend their agreements, procedures or both to comply with the revised framework. They may continue operating under the earlier requirements during that transition period.
Revenue Procedure 2026-20 applies to tax years ending on or after Oct. 6, 2026, giving staking-enabled crypto investment trusts a more defined path for preserving their federal tax classification.
