SEC Explores Staking Integration in ETPs: A New Era for Crypto Investors

The U.S. Securities and Exchange Commission (SEC) has been exploring the integration of staking functionality into Exchange-Traded Products (ETPs), as revealed in a leaked meeting memo dated February 5, 2025. Representatives from Jito Labs and Multicoin Capital Management discussed methods to enhance the investor experience by more accurately reflecting the inherent value of underlying crypto assets.

Incorporating staking into ETPs is seen as crucial for better price discovery and bolstering the security of native networks. The SEC identified two promising approaches for embedding a staking model: first, by permitting a subset of ETP assets to be staked via delegated validation nodes without compromising liquidity. The second method involves the use of Liquidity Staking Tokens (LST), which would facilitate staking across numerous digital assets, significantly enhancing the accessibility of staking for investors.

Jito Labs, a blockchain infrastructure provider, has been at the forefront of this discussion, with its JitoSOL product being a prime example of a staking-enabled ETP. JitoSOL allows investors to earn staking rewards while maintaining the liquidity and tradability of the underlying asset, SOL (Solana).

The integration of staking functionality into ETPs could potentially attract a broader range of investors, including those who may have been previously hesitant due to the illiquidity associated with staking. By offering staking rewards alongside the liquidity of ETPs, investors can now participate in the growth of crypto networks while still maintaining the flexibility to trade their assets.

As the SEC continues to evaluate the potential benefits and risks of incorporating staking functionality into ETPs, the crypto industry eagerly awaits further developments. The integration of staking could pave the way for a more inclusive and accessible crypto market, fostering growth and innovation in the sector.