SEC Delays Bitwise Ethereum ETF Staking Decision for Further Evaluation

The U.S. Securities and Exchange Commission (SEC) has delayed its decision on whether to allow the Bitwise Ethereum ETF to engage in staking. This delay is part of a formal process that provides additional time for the SEC to thoroughly consider the proposal. The SEC's decision to initiate proceedings does not indicate a rejection of the proposal but rather a need for further evaluation.

The SEC is particularly concerned with whether allowing staking would expose investors to additional risks, such as fraud, manipulation, or unfair trading practices. The regulatory body is focusing on whether the proposed changes comply with Section 6(b)(5) of the Securities Exchange Act, which mandates strong investor protections. The exchange that lists the ETF, NYSE Arca, had filed a proposal in March 2025 to amend its rules so the trust could stake its held Ethereum (ETH) and earn staking rewards.

For the next three weeks, the SEC is accepting public comments on the proposal. Interested parties can send their ideas, information, or concerns to the Commission via email or letter. The SEC will consider this input to help determine whether to accept or reject the proposal. A final decision might be made as soon as July 6, 2025, unless the SEC chooses to delay it again.

Staking Ethereum through the Bitwise’s ETF is currently suspended as regulators assess the possible benefits and hazards. The SEC's decision to delay the approval of Bitwise's proposal reflects its cautious approach towards cryptocurrency-related financial products. The regulatory body has been increasingly scrutinizing the cryptocurrency industry, particularly in light of recent legal actions against other companies offering similar staking services.

Bitwise's proposal to add staking to its Ethereum ETF is significant because it would allow investors to earn rewards by participating in the Ethereum network's consensus mechanism. Staking involves holding and locking up a certain amount of cryptocurrency to support the operations of a blockchain network, in return for which participants receive additional cryptocurrency as a reward. This mechanism is central to the functioning of many proof-of-stake blockchains, including Ethereum.

The delay in Bitwise's proposal is not an isolated incident. The SEC has also delayed decisions on other Ethereum ETF proposals, including those from Franklin Templeton. This pattern of delays suggests a broader regulatory strategy aimed at ensuring that cryptocurrency-related financial products comply with existing securities laws and protect investors from potential risks.

The SEC's concerns over investor risk are not unfounded. Cryptocurrency markets are known for their volatility and the potential for significant price fluctuations. Staking, while offering the potential for rewards, also carries risks, including the possibility of losing the staked assets if the network experiences technical issues or if the staking provider faces regulatory or legal challenges.

The delay in Bitwise's proposal is likely to have implications for the broader cryptocurrency industry. It underscores the need for companies to navigate the complex regulatory landscape carefully and to ensure that their products comply with all relevant laws and regulations. For investors, the delay serves as a reminder of the risks associated with cryptocurrency investments and the importance of conducting thorough due diligence before making investment decisions.

The SEC's decision to seek public input on Bitwise's proposal is a positive development. It allows for a more transparent and inclusive regulatory process, giving stakeholders the opportunity to voice their concerns and provide feedback. This input can help the SEC make a more informed decision and ensure that the final product is in the best interests of investors and the broader market.