SEC Greenlights Ethereum ETFs—Staking Gets a Free Pass from Securities Rules

The SEC just handed crypto a win by exempting staking from securities regulations—clearing the path for Ethereum ETFs. Wall Street’s favorite buzzword (’innovation’) meets its newest financial product.

No more regulatory limbo: The move effectively sidesteps the usual red tape, letting institutional investors dive into ETH without the usual hand-wringing over compliance. Because nothing says ’market maturity’ like letting hedge funds stake your coins for you.

Pro tip: Don’t expect the SEC to suddenly love crypto—this is pragmatism, not endorsement. But hey, when the rules bend this easy, maybe they were never really rules to begin with.

SEC commissioners react

SEC Commissioner Hester Peirce, a long-time advocate for clearer crypto regulation, supported the decision. She described staking as an essential part of proof-of-stake systems, where users contribute to network security by voluntarily locking up their tokens.

Peirce stressed that regulatory uncertainty has discouraged American users from engaging with these networks, despite their importance to blockchain infrastructure.

She said:

“The Division’s statement is applicable to persons who self-stake certain covered crypto assets on a proof-of-stake or delegated proof-of-stake network.”

However, not everyone at the Commission agreed. Commissioner Caroline Crenshaw criticized the staff’s interpretation, warning that it strays from legal precedent.

She argued that the Howey Test, a key legal standard used to identify securities, was overlooked in the analysis.

Crenshaw added:

“This is yet another example of the SEC’s ongoing ‘fake it ‘till we make it’ approach to crypto – taking action based on anticipation of future changes while ignoring existing law.”

What does this mean for ETFs?

The SEC’s position could have significant implications for spot ethereum exchange-traded funds, which are currently barred from staking their assets.

Nate Geraci, president of the ETF Store, noted that this guidance removes a major regulatory obstacle for funds seeking to stake Ethereum or other proof-of-stake assets.

However, Geraci pointed out that further clarity is still needed from the Internal Revenue Service (IRS), particularly around how staking rewards will be treated within the grantor trust structures typically used by ETFs.

If staking integration into these ETFs proceeds smoothly, it could unlock a new revenue stream for investors and enhance the appeal of crypto investment products within regulated markets

Meanwhile, Ethereum ETFs have been gaining momentum regardless, posting nine consecutive days of inflows totaling over $480 million.