"Virtual Asset Staking ETFs: Are They Securities or Not… Confusion Within the US SEC"

There are reports that even within the US Securities and Exchange Commission (SEC), there are differing interpretations as to whether exchange-traded funds (ETFs) based on staking yields from virtual assets (cryptocurrencies) fall under securities regulations.

On the 5th (local time), Bloomberg reported, "There are differing opinions within the US Securities and Exchange Commission (SEC) on whether staking ETFs utilizing Ethereum (ETH), Solana (SOL), etc., can actually be regarded as 'investment companies.'"

According to the outlet, REX Financial and Osprey Funds recently went through the application process with the SEC to list staking-based ETFs, but on the same day, SEC staff reportedly warned that these products may not meet the requirements under the Investment Company Act.

Staking is a method of participating in the operation of a blockchain network to receive rewards. It is reported that there was also an internal assessment within the SEC that staking yields could conflict with requirements under the Investment Company Act.

Adam Gana, an attorney at Gana Weinstein Law Firm, pointed out, "If an ETF is based on staking yields, the ETF itself could be classified as a traditional investment company," adding, "This becomes a structure that the SEC may perceive as within its regulatory purview." He further added, "The SEC will not overlook the issue simply because the ETF contains only a few stocks."

Meanwhile, there also appear to be differing views within the SEC. Hester Peirce, Director of the SEC's Virtual Asset Task Force (TF), recently stated on X (formerly Twitter), "I too have the same question as to whether these products qualify as investment companies."

Previously, last month, SEC staff indicated that staking activities may not generally fall under the scope of securities regulations under federal law. On the other hand, the emergence of the opposite interpretation in this case has led to concerns of increasing market confusion.

Corey Frayer, former SEC advisor, noted, "There is room for criticism in the regulatory authorities' approach of regarding certain assets as securities only when necessary."