Grayscale vs REX-Osprey: The Battle for Dogecoin ETF Supremacy in 2025

The U.S. crypto ETF landscape is undergoing a seismic shift as regulatory clarity and investor demand converge to unlock new opportunities. At the forefront of this evolution is the competition between Grayscale's physical-holdings model (GDOG) and REX-Osprey's derivatives-based approach (DOJE) for Dogecoin exposure. With the SEC's recent rule changes streamlining approvals and the broader adoption of crypto ETPs, the structural and strategic differences between these two models are critical for investors seeking optimal value.

Structural Foundations: Physical vs Derivatives

Grayscale's GDOG, which holds actual Dogecoin via Coinbase Custody, represents a traditional "spot" ETF structure. This approach offers direct ownership of the underlying asset, aligning with investor preferences for transparency and asset control. In contrast, REX-Osprey's DOJE, launched in September 2025, employs a derivatives-based model to track Dogecoin's price. While derivatives structures often rely on futures or swaps, DOJE's design leverages the regulatory flexibility introduced by the SEC's updated listing standards, which now permit crypto ETFs tied to assets trading on regulated markets or with CFTC-regulated futures.

The SEC's revised framework, which reduces approval timelines to 75 days and allows new ETFs to qualify if another product holds 40% of its assets in the same cryptocurrency, has leveled the playing field. This creates a hybrid advantage: GDOG's physical holdings could bolster DOJE's eligibility, while DOJE's derivatives structure benefits from reduced regulatory friction.

Cost Efficiency and Tracking Accuracy

Physical-holdings ETFs like GDOG typically incur higher operational costs due to custody, storage, and insurance requirements. These expenses are often passed on to investors through expense ratios, though Grayscale's scale may mitigate this. Derivatives-based models like DOJE, meanwhile, face tracking errors stemming from basis risk-the divergence between futures prices and spot prices. However, the SEC's approval of in-kind creation and redemption mechanisms has improved efficiency for both structures, reducing slippage and enhancing liquidity.

For Dogecoin, which remains a volatile and less liquid asset compared to Bitcoin or Ethereum, tracking accuracy becomes a double-edged sword. Physical ETFs avoid basis risk but may lag in rebalancing during rapid price swings. Derivatives-based ETFs, while agile, could amplify exposure to market volatility through leverage or roll costs in futures contracts.

Regulatory Risk and Strategic Positioning

The regulatory environment remains a wildcard. Physical-holdings ETFs are perceived as more "compliant" by default, as they directly own the asset, but they must navigate custody solutions and tax complexities. Derivatives-based ETFs, however, depend on the stability of futures markets and the SEC's ongoing tolerance for indirect exposure. The recent passage of the GENIUS and CLARITY Acts, which aim to clarify stablecoin and digital asset regulations, has reduced some uncertainties but not eliminated them.

Grayscale's strategic advantage lies in its first-mover status and institutional credibility. Its existing Bitcoin Trust (IBIT) has attracted $29.4 billion in inflows through August 2025, demonstrating the appeal of direct ownership. REX-Osprey, meanwhile, is capitalizing on the SEC's willingness to approve products that align with existing ETFs' holdings-a loophole that could accelerate DOJE's adoption if GDOG maintains its 40% threshold.

Investment Value: A Tug-of-War

For risk-averse investors prioritizing asset control and transparency, GDOG's physical structure is superior. It mirrors the appeal of traditional gold or commodity ETFs, offering a tangible claim to Dogecoin. However, DOJE's derivatives model may attract cost-conscious investors seeking flexibility, particularly if tracking errors remain narrow under the SEC's new in-kind mechanisms.

Regulatory tailwinds favor both structures, but the derivatives-based approach could gain traction in a market where speed to launch and operational efficiency are paramount. The SEC's expedited approval process and the growing acceptance of mixed-asset ETPs (e.g., Bitcoin-Ether products) suggest that structural innovation will drive competition.

Conclusion

Grayscale's GDOG and REX-Osprey's DOJE represent two distinct paths to Dogecoin exposure, each with trade-offs in cost, accuracy, and regulatory risk. While GDOG's physical holdings offer a tried-and-true model, DOJE's derivatives structure leverages regulatory agility and lower operational barriers. In a market where the SEC's evolving stance and investor preferences are in flux, the superior investment value will likely depend on macroeconomic conditions and the pace of institutional adoption. For now, the race is on-and the winner may hinge on which structure better aligns with the next phase of crypto's mainstream integration.