On 28 May 2025, the United States Securities and Exchange Commission (US SEC) published an order instituting proceedings to determine whether to approve or disapprove a proposed rule change to amend the grayscale ethereum trust etf and grayscale ethereum mini trust etf to permit staking of the ether held by the trusts, which aims to amend the listing conditions for the Grayscale Ethereum Trust ETF and the Grayscale Ethereum Mini Trust ETF to allow staking of Ether held by the Trusts. The proposal aims to integrate Ethereum’s Proof-of-Stake (PoS) mechanism into a regulated exchange-traded product structure, which raises novel legal and policy questions under federal securities law.
The proposed rule change, filed on 14 February 2025, seeks approval to amend the rules governing the listing and trading of shares of the Trusts under NYSE Arca Rule 8.201-E, which governs commodity-based trust shares. The amendment would permit the Trusts to stake the Ether they hold in the Ethereum network. All other previously approved representations concerning the Trusts would remain unchanged. The US SEC published the proposal for public comment on 3 March 2025 and later extended the initial decision deadline before now initiating formal proceedings under Section 19(b)(2)(B) of the Securities Exchange Act of 1934. This action reflects the Commission’s intent to evaluate the regulatory implications of incorporating staking functionality within an ETF wrapper.
- On 14 February 2025, NYSE Arca filed the proposed amendment with the US SEC. (SR-NYSEARCA-2025-13)
- On 3 March 2025, proposal was published in the Federal Register (Release No. 102485, 90 FR 11081).
- On 14 April 2025, US SEC designated 1 June 2025 as the extended deadline to decide on the rule change (Release No. 102855).
- On 28 May 2025, proceedings formally instituted by the US SEC to consider approval or disapproval (Release No. 34-103137).
The US SEC has raised issues with the consistency of the proposed staking amendment with Section 6(b)(5) of the US Securities Exchange Act (15 U.S.C. 78f(b)(5)), which requires that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts, promote fair and equitable trading, remove impediments to efficient markets, and protect investors. Allowing the Trusts to engage in staking, a dynamic, validator-based protocol activity which introduces regulatory uncertainty as to whether such participation can coexist with the passive investment structure required of listed trust shares.
The proceeding sets the stage for compliance recalibration across crypto-related financial products. Fund sponsors, custodians, staking infrastructure providers, and legal advisers must be alert to key concerns raised by the US SEC, which includes the classification of staking rewards, risk disclosures related to slashing and network penalties, delegation of staking authority to third-party validators, and the broader question of whether a fund’s participation in a PoS network undermines its passive investment nature. Additionally, the income generated from staking may have tax and accounting implications, which must be addressed in offering documents and compliance systems.
The US SEC is formally evaluating whether regulated exchange-traded funds can participate in crypto staking. Approval would signal a willingness to evolve existing ETF structures in line with PoS blockchain functionality and open pathways for staking-enabled yield strategies in regulated financial products. Disapproval, however, would likely reinforce the current boundary between passive crypto exposure and active blockchain participation. The outcome will influence how staking, as a fundamental blockchain mechanism, can be integrated within the frameworks of public markets and securities regulation.
The US SEC has requested written submissions on whether the proposed rule change is consistent with Section 6(b)(5) and other provisions of the US Exchange Act. Comments must be submitted within 21 days of the publication date in the Federal Register, and rebuttals within 35 days. The US SEC has not scheduled an oral hearing but will consider requests under Rule 19b-4.
“Pursuant to Section 19(b)(2)(B) of the US Securities Exchange Act the Commission is providing notice of the grounds for disapproval under consideration. As described above, the Exchange proposes to allow staking of the Trusts’ ether. The Commission is instituting proceedings to allow for additional analysis of the proposed rule change’s consistency with Section 6(b)(5) of the United States Securities Exchange Act.” —US SEC.
(Source: https://www.sec.gov/files/rules/sro/nysearca/2025/34-103137.pdf)
