Documents Show SEC Taking Anti-Crypto Staking Stance

U.S. regulators are reportedly scrutinizing plans by two firms to launch cryptocurrency ETFs.

As Bloomberg News reported on Saturday (May 31), REX Financial and Osprey Funds aim to launch exchange-traded funds (ETFs) that offer staking exposure, allowing investors to reap rewards by pledging tokens that help run the blockchain.

However, the report added, the Securities and Exchange Commission (SEC) has begun to raise concerns that the funds might not qualify as ETFs under securities laws, while the two funds say they have gotten initial SEC registration approval.

According to the report, the SEC wrote Friday to ETF Opportunities Trust — the legal entity that issues various ETFs, including those managed by companies like REX — saying that the ETFs may not meet the legal definition of an investment company, something they’d need if they wanted to list the funds on the stock market.

The SEC said it was worried the funds “improperly filed their registration statement” and that “disclosures in the registration statement regarding the funds’ status as investment companies may be potentially misleading.”

“We think we can satisfy the SEC on the investment company question, and we don’t intend to launch the funds until we do that,” Greg Collett, general counsel at REX, told Bloomberg.

“Even if the SEC doesn’t allow this structure to list, we still believe the more straightforward attempts to allow staking in a U.S. ETF will ultimately be successful,” Bloomberg Intelligence ETF analyst James Seyffart said. “It’s a matter of when, not if. But the SEC doesn’t seem to be a fan of the way REX tried to push these listings through.”

The SEC last year approved bitcoin ETFs after years of opposition to doing so. Then-Chairman Gary Gensler said at the time that the approval applied only to bitcoin and should not be seen as a sign that the regulator is ready to OK other listed securities.

“While we approved the listing and trading of certain spot bitcoin ETF shares today, we did not approve or endorse bitcoin,” Gensler said. “Investors should remain cautious about the myriad risks associated with bitcoin and products whose value is tied to crypto.”

Since then, the SEC has changed its attitude towards crypto somewhat under President Donald Trump’s administration.

For example, the agency has dropped or paused multiple legal actions against crypto companies, most recently a lawsuit against the crypto exchange Binance and several of its entities, as well as Binance founder Changpeng Zhao.