The SEC has raised concerns regarding proposed cryptocurrency ETFs that intend to offer staking rewards. Companies REX Financial and Osprey Funds are behind the suggestions for ETFs tracking Ethereum and Solana, which also aim to incorporate staking.
In a communication to ETF Opportunities Trust, the SEC inquired if these funds should be recognized as investment companies according to the Investment Company Act of 1940. The agency expressed worries about the ETFs’ design and their disclosure practices.
The SEC suspects that the registration statements may have been incorrectly filed and that the disclosures could mislead potential investors. Although the filing was deemed effective as of May 30, the funds have yet to launch or be listed on any trading platform.
This situation is complicated by the SEC’s recent guidance indicating that some forms of crypto staking, such as self-staking and custodial staking, do not classify as securities under federal law. However, the SEC’s letter suggests that including staking components in ETFs might clash with current regulatory frameworks.
Analysts see the SEC’s stance as a significant hurdle for the approval of staking-based ETFs. While some believe that the issues raised could be resolved through adjustments in fund structures and enhanced disclosures, others argue this is indicative of broader regulatory challenges faced by emerging financial products in the crypto sector. This ongoing dynamic highlights the persistent tension between the rapid evolution of cryptocurrency-based financial products and the regulatory systems attempting to regulate them.
honestly, this whole staking etf mess was totally predictable. the sec keeps flip-flopping on crypto rules and now funds are stuck in limbo. rex and osprey probably thought they had a clear path, but regulators always find new ways to complicate things. don’t think we’ll see these launch anytime soon unfortunately.
The SEC’s scrutiny of staking ETFs highlights ongoing apprehensions towards cryptocurrency. It’s perplexing that they approved the filings only to later question the structure. This appears to be an unfair situation for fund managers who hoped for certainty post-approval. Similar patterns have emerged with previous ETF launches where the SEC demands extensive risk disclosures, particularly for complex elements like staking. Future ETF structures may need to evolve, potentially creating clearer distinctions between staking rewards and the primary fund, alongside comprehensive risk management disclosures to appease regulators.
Wait, if the SEC already said self-staking and custodial staking aren’t securities, why are they suddenly having issues with ETFs that include staking? They’re contradicting their own guidance here.
I’m genuinely curious though - could this actually be good long-term? Maybe the SEC’s working out problems now instead of letting these funds launch and creating chaos later.
Anyone know how other countries are handling this? Are other regulators more flexible with staking ETFs, or is everyone this hesitant?
Feels like the SEC’s still figuring out these hybrid products. What do you think - should fund managers just skip staking components for now, or push through these regulatory hurdles?