Crypto trusts can keep staking their coins without losing grantor-trust tax treatment, the IRS said on Oct. 6, but only if they meet a list of 14 conditions and, for trusts already operating under the agency’s first staking guidance, only after a six-month window to fix their paperwork. Revenue Procedure 2026-20 rewrites a safe harbor the IRS first issued in November 2025 and applies to tax years ending on or after Oct. 6, 2026. The IRS posted it on its guidance page that day.
The ruling matters to anyone holding shares of an exchange-listed crypto trust, because grantor-trust status is what lets the fund pass its income and gains straight through to shareholders instead of being taxed itself. If a trust stakes coins outside the safe harbor, that status is at risk; inside it, the IRS says staking “does not prevent” the trust from qualifying as an investment trust.
The six-month window for trusts to amend their agreements under Revenue Procedure 2026-20 runs to early April 2027.
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What the first version allowed
The earlier safe harbor was Revenue Procedure 2025-31, issued Nov. 10, 2025. A PwC tax note from that month described it as letting trusts be classified as investment trusts and as grantor trusts while staking digital assets. The new document, Revenue Procedure 2026-20, says it “clarifies, modifies, and supersedes” that one.
The IRS says it was responding to requests for clarity on eight points: which proof-of-stake networks are covered, SEC approval of a trust’s disclosures, the use of multiple custodians, how far slashing protection must go, unstaking to fund distributions, consistent treatment of rewards, the line between borrowing and contingent liquidity arrangements, and the scope and grace period of the safe harbor. The principal author is Andrew B. Christopherson of the IRS Office of Associate Chief Counsel (Passthroughs, Trusts, and Estates).
Who qualifies
The safe harbor covers trusts formed under state law that qualify as investment trusts under the Treasury regulation on trust classification and as grantor trusts. Section 6.02 adds a market test: interests in the trust must be “traded on a national securities exchange.” The trust’s staking disclosure has to appear in an effective SEC registration statement, and the trust must have written liquidity risk policies.
A trust may hold only cash and units of one type of digital asset, and that asset must be transacted on a proof-of-stake network. A fund holding a basket of coins, or one not listed on an exchange, is outside what the procedure describes.
The conditions that govern the staking
Several conditions concern who holds and moves the coins. Custodians must hold the assets at addresses they control, and “only the custodian can access the private keys.” The trustee directs staking through custodians, who use unrelated staking providers chosen with due diligence, and reward allocations must be arm’s length. The trust, custodian and sponsor may not control the staking provider, apart from directing staking and unstaking. The trust stays the tax owner of the assets while they are staked.
Other conditions limit how much can sit idle. All of the trust’s digital assets must be staked at all times, subject to listed exceptions. The trust may hold some assets unstaked “to create and maintain a liquidity reserve,” sized solely to exchange redemption requirements, and assets may be briefly unstaked around sales, creations, distributions or reward accrual, then restaked as soon as reasonably possible. Contingent liquidity arrangements are allowed under defined conditions, but arrangements treated as borrowing for tax purposes are excluded.
Two conditions protect shareholders. The trust must be indemnified against slashing, the penalty a network can impose on a validator, when it results from events reasonably within the staking provider’s control. And staking rewards, net of expenses, must go to holders in kind, in cash or both, no more than 60 days after the end of the calendar quarter in which the trust gains dominion and control over them.
Six months to adjust
Section 6.03 sets the transition. A trust that acts within six months after Oct. 6, 2026 to meet the section 6.02 requirements, including by amending its trust agreement, will not lose its tax status because of those actions. Trusts already complying with Revenue Procedure 2025-31 may keep relying on it for up to six months after Oct. 6, 2026, and after that no trust may rely on the older document.
Section 7 sets a limit on the whole procedure. It says no inference should be drawn about situations outside the safe harbor or about tax treatment it does not expressly address, including forks, airdrops and the classification of staking income.
What a crypto trust holder can look for in the fund’s documents
The IRS’s guidance listing shows Revenue Procedure 2026-20 as posted on Oct. 6, 2026, and the PDF is the primary text. A shareholder cannot see a trust’s custody or staking contracts, but the fund’s SEC registration statement is where the procedure says staking disclosure must appear, so that document is the first place to look for how a given trust describes its staking, its liquidity reserve and its slashing protection.
Shareholders can also watch for amendments over the next six months. A trust that revises its governing agreement to meet section 6.02 is using the transition the IRS offered. The procedure says the six months run from Oct. 6, so April 2027 is the outside date.
Because the procedure says nothing about staking income classification, forks or airdrops, the document answers the question of whether the trust keeps its status and leaves the rest of the tax treatment of crypto to other guidance.
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This article was produced with AI assistance and reviewed by The Financial Wire’s editorial team.
David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
