IRS Rev. Proc. 2026-20 lets crypto trusts stake without losing tax status, but only exchange-traded ones

The Internal Revenue Service issued Revenue Procedure 2026-20 on October 6, a safe harbor that lets qualifying investment trusts stake the digital assets they hold without losing their status as investment trusts or grantor trusts for federal income tax. It "clarifies, modifies, and supersedes" Revenue Procedure 2025-31, according to this analysis. It matters because a trust that earns staking rewards could otherwise be treated as running a business, which would change how the trust and its holders are taxed.

Who it covers

The safe harbor applies only to trusts whose shares trade on a national securities exchange. According to RSM's summary, an eligible trust may hold cash and one type of digital asset, with the assets under the control of qualified custodians. Staking rewards must be paid in additional units of the same asset, and after expenses they must be distributed to holders, in kind or in cash, within 60 days after the end of the calendar quarter.

The 14 conditions

The analysis lists the requirements as including: exchange trading; holding a single digital asset; custodial control with the trust keeping ownership; staking for protective purposes; no powers to time the market; staking-provider contracts at arm's length; no operational control of validators; limits on how much can be staked; liquidity reserves; limits on holding unstaked assets; operational exceptions; rules for contingent liquidity arrangements; slashing indemnification; and proportional distribution of rewards. The 2026 version addresses eight areas practitioners asked about, including which proof-of-stake protocols are covered, the use of multiple custodians, the scope of slashing protection and what happens when assets are unstaked or sold.

Timing, and what it leaves out

It is effective for tax years ending after October 6, 2026. Trusts get six months to amend their governing documents, and trusts that followed the 2025 safe harbor can keep relying on it during that period only. Just as important is what the IRS explicitly did not address: staking by individuals, unrelated business taxable income, and crypto forks and airdrops. If you stake your own coins, this guidance does not change how your rewards are reported. We cover the open questions on that side in our reporting on the MetaMask staking incident, where reward timing was the issue, and in the Bitwise NEAR ETF launch, an example of the staking ETFs this kind of rule is built for.

Not tax advice. Trust sponsors and holders should read the revenue procedure itself or ask a tax professional.

Sources: Current Federal Tax Developments; RSM; Bloomberg Tax. Information, not investment advice.