Former SEC Official Warns Liquid Staking Could Be the Next Lehman Brothers

Amanda Fischer, former chief of staff at the SEC under Gary Gensler, has expressed concerns that liquid staking resembles the practices that led to the 2008 financial crisis. Her stance has drawn criticism from the cryptocurrency industry.

The SEC’s latest crypto giveaway is to bless the same type of rehypothecation that cratered Lehman Brothers — only in crypto it’s worse because you can do it without any SEC or Fed oversight.

So what’s going on? (thread) https://t.co/q0lop2IXWV

— Amanda Fischer (@amandalfischer) August 5, 2025

“Liquid staking allows cryptocurrencies to be deposited in exchange for a synthetic equivalent of the same assets through a centralized intermediary. Meanwhile, the user continues to receive rewards for the original tokens while using the synthetic ones for market operations,” she wrote. 

Fischer drew a parallel between this approach and the uncontrolled rehypothecation practiced by Lehman Brothers before its 2008 collapse. She argues that decentralization only heightens the risks, as tokens can be staked repeatedly without any oversight.

“If the synthetic coin proves to be insolvent or is hacked, it could trigger a chain reaction with serious market consequences, increasing losses,” the former official added. 

Her comments were in response to a ruling by the Commission under Paul Atkins, stating that liquid staking tokens do not constitute a securities offering. This decision aims to support innovation in DeFi. 

Industry Reaction 

Matthew Sigel, head of digital assets at VanEck, pointed out contradictions in Fischer’s statements. 

First you say the SEC is blessing crypto. Then you say crypto has no SEC oversight. Which is it? You’re contradicting yourself mid-rant.

— matthew sigel, recovering CFA (@matthew_sigel) August 5, 2025

“First you say the SEC is blessing crypto. Then you say crypto has no SEC oversight. Which is it?” he noted. 

The expert highlighted that the regulator has excluded liquid staking from securities regulation. This does not mean there will be no oversight at all—it indicates that the Commission does not plan to interfere with the operation of decentralized systems.

Magic Eden’s chief legal officer, Joe Doll, accused Fischer of “deliberately distorting facts.” 

This is an incredibly misleading post that demonstrates either a misunderstanding of the basic technological features that underpin liquid staking (dumb/ill-prepared), or deliberate mischaracterization (malicious)

— Sh0edog 🇺🇦 (@sh0edog) August 5, 2025

“This is an incredibly misleading post that demonstrates either a misunderstanding of the basic technological features that underpin liquid staking (dumb/ill-prepared), or deliberate mischaracterization (malicious),” he responded to the former SEC leader’s message. 

Helius Labs CEO Mert Mumtaz added: 

“Comparing transparent decentralized systems, governed by verifiable code, to opaque shadow schemes controlled by fraudsters, and claiming the former are worse is utter nonsense. You either have no understanding of how LST work, or you are deliberately pretending not to understand.”

Blockchain technology attorney Kurt Watkins acknowledged that Fischer raised an important issue about potential staking abuse but called her conclusions exaggerated.

“We’re talking about liquid staking systems where the provider makes no independent decisions, and the token represents a passive claim on the original asset,” he said in a comment to Decrypt, emphasizing that the SEC does not endorse leveraged products or instruments. 

Back on August 1, Atkins announced Project Crypto—a comprehensive initiative to modernize regulations, aiming to transform the U.S. into the “world’s crypto capital.” Analysts at Bernstein described it as “the boldest and most transformative vision for cryptocurrencies ever articulated by the SEC.” 

For the main events in crypto market regulation in July, see the latest digest: