The battle for a clear regulatory framework in the U.S. crypto ETF market continues to evolve, with the Securities and Exchange Commission (SEC) recently flagging concerns over proposed staked Ethereum and Solana ETFs from REX Financial and Osprey Funds. While the crypto industry celebrates a recent SEC statement clarifying that certain staking activities do not constitute securities offerings, the path for staked ETFs remains intricate, highlighting the nuanced approach regulators are taking in 2025.
The Staking Clarification: A Ray of Hope
Just days before the recent SEC letter to REX and Osprey, the agency’s Division of Corporation Finance issued a significant statement on May 29, 2025. This guidance explicitly stated that “Protocol Staking Activities” – where cryptocurrencies are staked in a Proof-of-Stake (PoS) blockchain to earn rewards – generally do not need to register with the Commission as securities offerings. This was hailed as a major win for the crypto industry, providing much-needed clarity that staking, in its purest form, is viewed as compensation for services rendered to a blockchain network, not an investment contract.
This landmark clarification was seen as potentially paving the way for staking to be incorporated into ETFs, a feature many industry executives, including BlackRock’s head of digital assets, have acknowledged as making Ethereum ETFs “more perfect.” Indeed, firms like ARK and Fidelity have proposals on file to include staking in their Ethereum ETFs, and the recent SEC guidance has certainly boosted optimism for their eventual approval.
REX and Osprey’s Staked ETFs: A New Hurdle
Despite this broader positive sentiment around staking, the SEC’s recent communication to ETF Opportunities Trust (which issues REX and Osprey’s ETFs) indicates that the journey for specific staked ETF structures is far from over. The SEC’s concerns center not on the legality of staking itself, but on whether the proposed REX-Osprey ETH + Staking ETF (ticker: ESK) and REX-Osprey SOL + Staking ETF (ticker: SSK) legally qualify as “investment companies” under the Investment Company Act of 1940 (“40-Act”).
The SEC expressed worries that the funds “improperly filed their registration statement” and that “disclosures… regarding the funds’ status as investment companies may be potentially misleading.” These ETFs are structured as C-corporations, a rare approach for ETFs, and aim to bypass the lengthy 19b-4 approval process typically required for most crypto products by operating under the 40-Act. This unique structure, while innovative, seems to have raised red flags for the regulator.
Greg Collett, general counsel at REX Financial, remains confident that they can satisfy the SEC on the investment company question and do not intend to launch the funds until these concerns are addressed. This indicates an ongoing dialogue and a commitment to work within regulatory boundaries.
Navigating the Regulatory Maze: Why It Matters for Investors
The SEC’s nuanced approach to staked ETFs is critical for crypto investors for several reasons:
- Yield Generation: Staking allows investors to earn rewards by participating in blockchain operations. Incorporating staking into ETFs could offer traditional investors a regulated way to access this yield, a compelling proposition in a low-interest-rate environment.
- Institutional Capital Inflow: The approval of spot Bitcoin ETFs has already demonstrated the immense potential for institutional capital to flow into the crypto market. Staked ETFs, if approved with a clear regulatory framework, could unlock further billions, especially for PoS assets like Ethereum and Solana.
- Market Legitimacy: Each step towards regulatory clarity and the creation of compliant investment vehicles enhances the legitimacy of the crypto market in the eyes of traditional finance.
- Diversification: Staked ETFs would offer investors more diversified exposure to the crypto market beyond just spot price movements, potentially attracting a broader range of risk appetites.
Current Market Dynamics and Future Outlook:
Despite the regulatory scrutiny on specific ETF structures, the broader sentiment around crypto ETFs remains robust in mid-2025. Spot Ethereum ETFs have seen significant inflows since their launch in July 2024, and the recent SEC clarification on staking has intensified discussions about adding staking features to these existing products.
Bloomberg Intelligence ETF analyst James Seyffart noted that while the SEC may not allow the REX-Osprey structure to list as proposed, “more straightforward attempts to allow staking in a US ETF will ultimately be successful. It’s a matter of when, not if.” He also indicated that delays in ETF applications are typical, with many filings having final due dates in October.
The establishment of the SEC’s dedicated Crypto Task Force earlier in 2025, headed by Commissioner Hester Peirce (often dubbed “Crypto Mom” for her pro-crypto stance), also signals a more constructive engagement from the regulator compared to previous enforcement-heavy approaches. This task force is expected to provide more comprehensive guidance, hopefully clarifying the path for innovative crypto products.
Patience and Precision in a Maturing Market
The ongoing dialogue between the SEC and ETF issuers like REX and Osprey underscores the evolving maturity of the crypto market. While the $27 trillion BlackRock XRP rumor remains firmly in the realm of speculation, the tangible efforts to bring regulated, yield-generating crypto products to market are very real. The SEC’s recent staking clarification is a monumental step forward, but the specifics of how these products are structured to meet existing investment company laws remain a critical hurdle.
For crypto investors and readers, this saga highlights the delicate dance between innovation and regulation. The eventual approval of staked ETFs, especially for Ethereum and Solana, could unlock significant value and further bridge the gap between traditional finance and the decentralized world. While the journey may involve further clarifications and structural adjustments, the direction of travel seems clear: the institutionalization of crypto, with staking playing an increasingly prominent role, is not a question of if, but precisely how and when. Investors should continue to monitor regulatory developments closely, as these will heavily influence the next wave of capital inflow into the digital asset ecosystem.
Disclaimer: All content published by Crypto Pro Live (CPL) is intended solely for informational and educational purposes. It does not constitute financial, investment, or legal advice. While we strive for accuracy and reliability, CPL assumes no responsibility for any financial decisions, losses, or actions taken based on the information provided. Readers are encouraged to conduct thorough research and seek professional guidance before making investment choices.
Nikolai Carter
