The U.S. Securities and Exchange Commission (SEC) is intensifying its examination of crypto staking, a key element of proof-of-stake (PoS) blockchain networks such as Ethereum. The regulatory environment could soon change, potentially altering how the practice of staking is included within financial instruments.
This has been an ongoing topic of debate in the industry and may impact the future potential of crypto ETFs and market participation.
However, the SEC has expressed concerns about staking in ETFs. These include liquidity risks from unbinding periods that conflict with T+1 settlement rules, which mandate next-day redemptions. This could hinder investors’ ability to access their funds promptly.
Taxation of rewards as income and whether staking constitutes a securities transaction further complicate matters. These issues have historically led the SEC to reject such features in ETFs.
Recent Developments
The SEC increasingly focuses on crypto staking, indicating that the agency is changing its approach. Fox Business reporter Eleanor Terrett reported via her social media platform, X, that the agency is “very, very interested” in the practice of staking and is likely to issue a formal notice soon.
In February 2025, the SEC met with Multicoin Capital and Jito Labs to discuss liquid staking tokens, aiming to solve the issues of liquidity and redemption associated with the traditional approach to staking.
Additionally, the 21Shares Core Ethereum ETF filing by Cboe BZX Exchange is significant. The plan includes a mechanism allowing ETH to remain part of the ETF.
However, it will earn rewards on staking while alleviating asset protection and liquidity concerns. It could serve as a blueprint for how other ETFs are filed in the future.
What It Means for Crypto ETFs
Allowing staking in ETFs could enhance investor returns by enabling funds to participate in network validation. This would align ETF performance more closely with the underlying assets’ earning potential, which may attract institutional investors and provide a more robust income stream.
Furthermore, permitting in-kind creations and redemptions could reduce transaction costs and improve tax efficiency, ultimately expanding investment opportunities in the crypto space.
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