SEC Raises Concerns About Crypto ETFs Providing Staking Rewards
WASHINGTON – An important initiative to establish US crypto exchange-traded funds (ETFs) that provide staking rewards is facing regulatory uncertainties, even after the funds announced they had obtained preliminary registration approval from the US Securities and Exchange Commission (SEC).
Issuers REX Financial and Osprey Funds aim to introduce ETFs that track Ethereum and Solana, offering staking exposure, which permits investors to earn rewards by committing tokens to support blockchain operations.
US regulators are now expressing concerns that these funds may not qualify as ETFs under federal securities law.
In a letter dated May 30, sent to ETF Opportunities Trust – the legal entity responsible for issuing various ETFs, including those managed by companies like REX – SEC staff indicated that the two ETFs might not meet the legal criteria for investment companies, a classification necessary for listing on the stock exchange.
The SEC mentioned that 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.”
Mr. Greg Collett, general counsel at REX Financial, stated: “We believe we can address the SEC’s concerns regarding the investment company issue, and we do not plan to launch the funds until we achieve that.”
The SEC declined to comment further beyond the letter.
SEC commissioner Caroline Crenshaw, the only Democrat on the commission and a consistent critic of its recent stance on crypto during President Donald Trump’s era, stated that the situation exemplifies the agency’s fragmented approach to crypto regulation.
During his re-election campaign, Mr. Trump promoted his digital collectibles, gathered donations from crypto enthusiasts, and stated his intention to establish the US as the “crypto capital of the planet.”
Since February, following the creation of a special advisory group on cryptocurrency, SEC staff have released statements indicating that crypto assets like memecoins and stablecoins are not considered securities, thereby falling outside the SEC’s jurisdiction.
Nevertheless, firms see opportunities to register with the SEC to introduce new products, Ms. Crenshaw remarked in a statement on May 31.
“How is it that these crypto assets are supposedly not considered securities concerning registration requirements, yet conveniently are deemed securities when a registrant perceives an opportunity to market a new product?” she questioned. “If you’re confused, join the club.”
This is the second instance in recent months where the SEC has publicly doubted a listed fund investing in alternative asset classes.
In March, the SEC criticized an ETF by State Street Corp and Apollo Global Management – the first to invest in private credit – just hours after the fund was listed.
James Seyffart, an ETF analyst at Bloomberg Intelligence, stated: “Even if the SEC does not permit this structure to list, we still believe more straightforward attempts to incorporate staking in a US ETF will ultimately succeed. It’s a matter of when, not if. However, the SEC doesn’t seem to favor the approach REX took in trying to expedite these listings.”
REX announced it received an effective registration for the two ETFs earlier on May 30, meaning they could be listed at any moment. REX founder Greg King mentioned at the time that the company was aiming for a mid-June launch for both.
The SEC stated on May 30: “If these concerns remain unresolved, the commission staff will explore the appropriate next steps to ensure compliance with federal securities laws.” BLOOMBERG
Join ST’s Telegram channel and receive the latest breaking news directly to you.
Source link
#SEC #flags #concerns #crypto #ETFs #offer #staking #rewards
