TL;DR
- The U.S. SEC has raised concerns about the legal structure of new ETFs from REX Financial and Osprey Funds that include staking rewards.
- These funds focus on Ethereum and Solana, but the regulator doubts whether they meet the legal definition of an ETF.
- Although their initial registration was approved, the launch is now on hold until legal uncertainties are resolved.
Even though the funds from REX Financial and Osprey Funds initially received approval for registration, the Securities and Exchange Commission (SEC) has halted their launch plans. The reason: doubts over whether these products, which offer staking rewards for Ethereum and Solana, meet the required legal structure to be considered ETFs under U.S. securities law.
The proposed ETFs use an uncommon C-corporation structure and intend to allocate at least half of their assets to staking in order to generate additional income. This setup has triggered concerns at the SEC, which argues that such a model could violate the “Investment Company Act” and conflict with the standard rules that apply to exchange-traded funds.
Concerns About Structure And Transparency
In a letter sent Friday to ETF Opportunities Trust—the legal entity backing the funds—the SEC stated that the registration materials could be misleading and questioned the legal classification of these funds as investment companies. Although REX received an effective registration, theoretically allowing them to launch, the firm has chosen to wait until all legal issues are clarified.
Greg Collett, General Counsel at REX Financial, affirmed they are prepared to work with the SEC to resolve the concerns.
“We won’t launch the funds until we’ve fully met all legal requirements,”
he explained. He also emphasized that staking, if properly structured, can be a legitimate tool to expand access to decentralized finance from traditional financial markets.
Confidence In The Future Of Staking-Based ETFs
Despite the temporary pause, experts in the crypto sector see this as a delay rather than a final rejection. Bloomberg Intelligence analyst James Seyffart stated that this new generation of ETFs will eventually be approved, though it may require clearer structures that fit within existing regulations.
Meanwhile, the crypto community views this situation as evidence that the ecosystem continues to evolve and challenge the boundaries set by traditional institutions. Beyond the current obstacles, including staking in regulated financial instruments represents a natural step forward for digital assets on their path to institutional adoption. These types of tensions show that innovation is moving faster than regulation, but also that a conversation between both worlds is already underway.
