1-6-2025 – The United States Securities and Exchange Commission (SEC) has raised significant concerns over a proposed amendment to register exchange-traded funds (ETFs) tied to staked Solana (SOL) and Ether (ETH). The proposal, put forward by REX Financial and Osprey Funds, has hit a stumbling block due to the funds’ adoption of an unconventional c-corp structure. This corporate framework, seldom seen in the ETF arena, appears to clash with the SEC’s 6C-11 regulation, widely known as the “ETF rule,” which sets stringent guidelines for the acceptable corporate architecture of such investment vehicles.
The SEC’s reservations, articulated in a letter issued on May 30, centre on whether these funds align with the legal definition of an “investment company” under the Investment Company Act. The regulator has also flagged potential inaccuracies in the funds’ registration disclosures, particularly regarding their classification as investment companies, which could mislead investors. This scrutiny underscores the SEC’s cautious approach to integrating novel financial products into the tightly regulated ETF market.
Despite the regulatory hurdles, optimism persists within the industry. Eric Balchunas, a seasoned ETF analyst at Bloomberg, highlighted in a May 31 commentary that REX Financial’s legal team remains confident in navigating these challenges. The race to secure first-mover advantage in the burgeoning altcoin and staking ETF market is intensifying, with issuers pushing innovative boundaries to capture investor interest. The prospect of these ETFs unlocking fresh liquidity from traditional financial markets has crypto investors and traders watching closely, hopeful for a breakthrough that could reshape the sector.
Adding to the narrative, Bloomberg’s James Seyffart noted that delays in ETF approvals are par for the course, with final decisions on many filings not expected until October. He stressed that early approvals are rare, tempering expectations while affirming that recent SEC guidance has clarified that crypto staking does not contravene securities laws.
