The US Securities and Exchange Commission (SEC) has raised concerns that two planned crypto ETFs offering staking rewards may not meet the legal requirements for exchange-traded funds.
The affected products from REX Financial and Osprey Funds aim to generate additional income for investors through the staking of Ethereum and Solana. Although the funds have already received preliminary registration, the SEC is now questioning whether they are legally permitted to operate as ETFs, according to a Bloomberg report.
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Regulatory concerns
The SEC argues that the integration of staking mechanisms could place the funds outside the definition of a traditional ETF under the Investment Company Act of 1940. In particular, there are concerns that the income generated from staking could be classified as unregistered securities, which would trigger additional regulatory requirements. This uncertainty could lead to delays for the funds.
The SEC’s concerns could have far-reaching implications for the crypto industry. Staking is a core component of many proof-of-stake blockchains like Ethereum and Solana. If the SEC maintains its restrictive stance, future financial products with similar mechanisms could also face regulatory hurdles. This could stifle innovation in the crypto-financial products space and unsettle investors.
Industry response
Representatives from the crypto industry have voiced concerns about the SEC’s stance. They argue that the inclusion of staking in ETFs represents a natural evolution and offers investors additional opportunities. However, the current uncertainty may cause companies to hesitate in developing new products due to fears of regulatory setbacks.
This case once again highlights the ongoing tension between financial innovation and regulatory caution. While providers like REX and Osprey are working to make crypto products more attractive and yield-oriented, the SEC continues to apply a conservative interpretation of existing financial laws. Many industry experts are therefore calling for updated legislation that reflects the unique characteristics of digital assets—especially when it comes to active components like staking, which have no equivalent in traditional financial products.
