The US Securities and Exchange Commission (SEC) has kicked off the process of reviewing the Grayscale Ethereum ETF staking proposal for a filing submitted by the NYSE Arca on February 14, 2025. A decision is expected before May 26, 2025.
According to a February 24 notice by the SEC, the agency will include a public comment period with an initial 45-day decision timeline that could be extended for up to 90 days. Should the applicant gain approval, the move will introduce Ethereum staking rewards as an additional feature for Ethereum ETF investors.
Grayscale Ethereum ETF Staking Proposal Review
Coinbase Custody will secure the Fund
The filing sought regulatory approval for Ethereum staking activities within the Grayscale Ethereum Trust ETF and the Grayscale Ethereum Mini Trust ETF that would be managed solely by the ETF sponsor – the staked ETH will not be pooled with other entities or managed by a traditional staking service. The Grayscale Ethereum ETF staking proposal states that Coinbase Custody will continue securing the fund’s Ethereum holdings, maintaining the current security framework. The filing states:
“Staking by the sponsor will not result in the Ethereum held by the Trust moving out of the custody of the Custodian […] this process does not involve the staked Ethereum leaving the wallet at which it is held.”
SEC now More Responsive
The SEC is now Engaging More Positively.
The Grayscale Ethereum ETF staking proposal has been in the works for some time now, and it is seeking to add Ethereum staking to its ETH ETF plan. The company had proposed a similar staking structure in March 2024 through Fidelity, but a complicated regulatory process delayed the expected outcome and approval.
According to information from people familiar with the situation, the SEC was especially concerned about staking, mainly due to the lack of a clear policy framework and whether it would be classified as an investment contract in line with the US Securities laws. However, recent happenings within the industry highlight that the agency is now engaging positively with the industry to understand better what Ethereum staking entails and what benefits investors would accrue.
Change of Heart by the SEC
Change of Heart from SEC
Regarding the perceived change of heart from the SEC, Journalist Eleanor Terrett recently stated on social media platform X that the SEC was interested in understanding Ethereum staking and consulted with industry experts to gain additional insights. Terrett stated:
“Given the SEC Gov’s newfound interest in staking, it seems logical that it will also reconsider its lawsuit against Consensys, which it sued last year over its @MetaMask staking service. The SEC also alleged Consensys had been operating as an unregistered broker, the same claim it’s now dropping against Coinbase.”
Cardano ETF Staking Proposal
In addition to the Grayscale Ethereum ETF staking proposal, the agency has also started reviewing Grayscale’s filing for a Cardano (ADA) ETF spot. Giving the green light will expose investors to Cardano without buying the asset directly. The filings are a strategy Grayscale employs to expand its crypto ETF offerings beyond Bitcoin and Ethereum.
Conclusion
Acknowledging the Grayscale Ethereum ETF staking proposal, the SEC is sending a positive sentiment to the crypto community amid anticipated regulatory developments following the Trump administration’s formation of the crypto regulatory taskforce. The SEC has recently acknowledged similar proposals from 21Shares for staking in its Core Ethereum ETF.
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Frequently Asked Questions (FAQs)
Does ETH ETF allow staking?
Ethereum network allows for staking its native asset, allowing validators who successfully stake ETH to receive rewards.
What are the benefits of staking Ethereum?
Staking ETH tokens in your Ethereum wallet currently offers an average return of between 3 and 5% in rewards, depending on the platform.
What are the other ETFs for Ethereum?
In a historic move, the SEC approved eight spot ETH ETFs in 2024. They include BlackRock, Fidelity, Grayscale, Bitwise, VanEck, Ark, Invesco Galaxy, and Franklin Templeton.
Are there risks associated with ETH ETF staking?
Validators can lose some of their staked ETH ETFs due to downtime or malicious behavior.
Appendix: Glossary of Key Terms
Ethereum: A decentralized, blockchain-based platform that facilitates peer-to-peer contracts and DApps with ETH as its native cryptocurrency.
ETH Staking: Locking up your Ether (ETH) to become a validator, contributing to the network’s security and earning rewards through additional ETH.
ETF: Publicly traded securities that offer exposure to the price movements of bitcoin futures contracts
SEC: SEC refers to the US Securities and Exchange Commission.
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Tom Nyarunda is a writer with in-depth knowledge of blockchain, cryptocurrency, NFTs, and SaaS. Based in Kenya, Tom has devoted his time to the study of Bitcoin and cryptocurrency, as he believes them to be incorruptible products of the future.
