SEC Weighs Grayscale’s Ethereum ETF Staking Proposal Ahead of Key Decision

• The SEC is reviewing Grayscale’s plan to allow staking in its Ethereum ETF with a decision expected before May 2025.
• Grayscale’s Ethereum ETFs could stake ETH through trusted providers while keeping custody arrangements unchanged.
• The SEC’s decision on staking may impact future crypto ETFs as regulators engage with industry experts on the issue.

The U.S. Securities and Exchange Commission (SEC) is evaluating a proposal that would allow staking in Grayscale’s Ethereum Exchange-Traded Fund. A decision is expected before May 26, 2025.

Proposal Details and Staking Mechanism

NYSE Arca submitted the proposal on February 14, 2025, seeking approval for staking activities within the Grayscale Ethereum Trust ETF and the Grayscale Ethereum Mini Trust ETF. If approved, the ETFs could stake Ethereum through trusted providers, allowing investors to earn staking rewards without altering existing custody arrangements.

The filing states that only the ETF sponsor will manage the staking process. Staked Ethereum will not be pooled with other entities or marketed as a separate staking service. Coinbase Custody will continue to secure the fund’s Ethereum holdings, ensuring stability and security.

SEC’s Review Process and Timeline

The SEC has acknowledged the proposed rule change and initiated a public comment period. The initial review period lasts 45 days, but it can be extended to 90 days. If approved, the proposal could introduce staking rewards as a feature for Ethereum ETF investors.

Grayscale has been exploring staking for its Ethereum ETF for some time. In March 2024, the company proposed a similar structure, following Fidelity’s lead. However, regulatory challenges delayed approval.

Regulatory Concerns and Industry Engagement

The SEC expressed previous worries about staking methods because they need to identify if these operations fit U.S. securities law criteria for investment contracts. Reports indicate that the agency is currently collaborating with industry professionals to learn about various staking models alongside their advantages.

The agency’s interest in staking coincides with ongoing legal matters. It has been reconsidering a lawsuit against Consensys, which faced allegations over its MetaMask staking service. The SEC had also accused Consensys of operating as an unregistered broker, similar to its claims against Coinbase.

Market Developments and Related ETF Filings

The SEC’s acknowledgment of Grayscale’s staking proposal follows a similar request from 21Shares for staking in its Core Ethereum ETF. This signals a growing interest in integrating staking into regulated investment products.

The SEC is performing an assessment of Grayscale’s filing to create a Cardano spot exchange-traded fund (ETF). The SEC approval of this investment vehicle would provide investors with direct Cardano exposure without owning the asset. This filing is part of Grayscale’s broader expansion strategy beyond Bitcoin and Ethereum ETFs.