U.S. SEC Raises Concerns Over Staking ETFs Amid Regulatory Scrutiny

The U.S. SEC has raised significant concerns regarding the proposed staking-based ETFs, particularly those tied to Solana and Ethereum. In June 2025, the SEC questioned whether these funds, proposed by issuers like REX Shares and Osprey Funds, comply with the Federal Securities Laws’ definitions of an investment company or ETF.

Industry experts argue that the SEC’s move to halt proposed crypto ETFs allowing staking may neither help nor hinder other issuers’ efforts to integrate staking features into their own funds. Registration statements for the Rex-Osprey ETH Staking ETF and the Rex-Osprey SOL Staking ETF became effective on May 30, but “without resolution of staff comments,” according to an SEC letter issued the same day.

These funds were structured as C-corporations, a "unique structure" highlighted by Bloomberg Intelligence analyst James Seyffart. This structure allows the funds to bypass the 19b-4 process, which typically requires self-regulatory organizations to propose rule changes to the SEC for approval.

This approach reflects the evolving strategies of issuers navigating regulatory complexities as they seek to bring innovative crypto products to market.

Delays in ETF Approvals Reflect Cautious Approach

The SEC’s cautious stance extends beyond staking ETFs to other crypto ETF proposals involving in-kind creations and redemptions. In May 2025, the SEC postponed its ruling on Fidelity's proposal to allow its Bitcoin and Ethereum ETFs to use in-kind mechanisms, a feature also under review for WisdomTree’s Bitcoin Fund.

Regarding the WisdomTree Bitcoin Fund, the SEC invites individuals to submit written data, views, or arguments on whether the rule change should be approved or disapproved within 21 days, according to a Monday release from the agency. This delay aligns with the SEC’s request for public feedback on WisdomTree’s proposal, indicating a thorough evaluation of risks like market manipulation and custody issues.

Similarly, the SEC deferred decisions on Grayscale’s proposed XRP ETF and Bitwise’s Ethereum ETF with staking components, with deadlines now expected in July or October 2025. The SEC is likely to utilize the full 240-day review period for these 19b-4 proposals, reflecting heightened scrutiny.

Broader Regulatory Dynamics and Future Outlook

The SEC’s actions in May and June 2025 highlight a broader regulatory focus on the cryptocurrency industry, particularly as it navigates ETF approvals and enforcement. The SEC continues to monitor crypto market developments, with potential policy shifts influenced by the anticipated nomination of Paul Atkins as the new SEC chair.

Atkins’ leadership could shape the agency’s approach to innovative financial products like crypto ETFs. Meanwhile, posts on X reflect industry frustration, with one user stating that SEC delays are stifling crypto innovation, capturing the sentiment around prolonged reviews.

As the SEC balances investor protection with market innovation, the crypto industry eagerly awaits clarity on ETF approvals, with key decisions looming in the second half of 2025.