On 19 February 2025, the United States Securities and Exchange Commission (US SEC) issued Release No. 34-102450, announcing the filing of a proposed rule change by Cboe BZX Exchange, Inc. The proposal seeks to amend the 21Shares Core Ethereum ETF, which has been approved for listing and trading under BZX Rule 14.11(e)(4), to permit the staking of Ether held by the Trust. The SEC is now soliciting public comments on this proposed amendment.
The proposed rule change, filed on 12 February 2025 by Cboe BZX Exchange, Inc., aims to modify the structure of the 21Shares Core Ethereum ETF to allow the staking of its Ether holdings. The Exchange initially received US SEC approval for listing and trading the ETF under United States Exchange Rule 14.11(e)(4), which governs the listing of Commodity-Based Trust Shares. According to the proposal, staking would be facilitated through one or more trusted staking providers and would generate staking rewards in the form of additional Ether. The US SEC is currently reviewing whether this change aligns with regulatory standards under the United States Securities Exchange Act of 1934.
The original approval of the 21Shares Core Ethereum ETF by the US SEC on 23 May 2024 permitted investors to gain exposure to Ethereum without directly holding the asset. The fund was initially called ARK 21Shares Ethereum ETF before being renamed through an amendment filed on 10 June 2024. On 12 September 2024, Cboe BZX further amended the ETF’s structure to add new custodians. Now, the latest proposal introduces staking functionality, a feature in Ethereum’s Proof-of-Stake (PoS) blockchain system, which replaces mining with validator nodes that earn rewards by securing the network.
The amendment outlines the staking process, stating that Ether staked by the Trust will remain in custody of the Custodian. The Sponsor of the Trust will oversee the staking operations and ensure that it is conducted through regulated and reputable staking providers. The proposal clarifies that the Sponsor will not engage in delegated staking or act as a “staking-as-a-service” provider, distinguishing its structure from other staking programmes that have faced SEC enforcement actions.
The US SEC will determine whether to approve or disapprove the proposed rule change within 45 days from the date of publication in the Federal Register. This period may be extended to 90 days if necessary.
According to the filing, the staking process will be carefully structured to avoid characteristics that could classify it as a securities offering. The Sponsor will not guarantee staking rewards, nor will it subsidise the risk of slashing penalties, which occur when validators fail to follow network rules. Additionally, the Trust’s staking strategy will be passive, relying on third-party staking providers rather than engaging in proprietary staking operations.
The US SEC’s evaluation of this proposal will likely consider recent enforcement actions against firms offering staking-as-a-service. In previous cases, the US SEC has classified such offerings as unregistered securities due to the expectation of profits from the efforts of others. Ensuring that the 21Shares Core Ethereum ETF does not fall into this category will be important for its approval.
US SEC has seeked comments from investors and market participants regarding the proposal, which can be done via email or through the US SEC’s internet comment form.
(Source: https://www.sec.gov/files/rules/sro/cboebzx/2025/34-102450.pdf)
