SEC Extends Review of Grayscale's Ethereum ETF Staking Proposal to June 1

The U.S. Securities and Exchange Commission (SEC) has extended the decision period for a proposed rule change that would enable staking within Grayscale’s Ethereum spot ETF products. The proposal, submitted by NYSE arca on February 14, 2025, and made available for comment in the Federal Register on March 3, 2025, aims to allow the ETFs to earn extra yield by staking their Ethereum positions.

The SEC’s notice, released on April 14, 2025, indicates that the original 45-day review period, which was set to conclude on April 17, 2025, has been extended to June 1, 2025. The Commission stated that it needs additional time to thoroughly evaluate the proposal and the issues it raises. This extension is a standard procedural move under Section 19(b)(2) of the Securities Exchange Act of 1934, which allows the SEC to extend its review period from 45 days to up to 90 days if deemed appropriate.

The delay in the SEC's decision comes after Grayscale filed a 19b-4 for the Hedera ETF with the SEC. The Commission has received no public comments on the proposed rule change to date, which may have contributed to the decision to extend the review period. The SEC’s conservative stance on cryptocurrency investment products is evident in this decision, as the Commission must decide either to approve the proposal, disapprove it, or institute a procedure to determine if the proposal should be disapproved by the new deadline of June 1, 2025.

If approved, the proposal would allow Grayscale’s Ethereum Trust ETF and Ethereum Mini Trust ETF to become part of Ethereum’s proof-of-stake system. Staking involves locking ETH to support the network and earn rewards, which would provide ETF investors with additional income aside from the appreciation in Ethereum’s price. Currently, these ETFs hold Ethereum but do not earn staking yield. The rule change under consideration would alter the way these funds operate, potentially creating a precedent for other Ethereum ETF issuers who may seek similar relief for their funds.

The determination by the SEC could also provide insight into the Commission’s evolving position on proof-of-stake involvement using regulated investment products. Grayscale had previously sought approval for a Litecoin ETF and an XRP ETF, indicating the company’s interest in expanding its range of cryptocurrency investment products. The delay in the SEC's decision highlights the ongoing regulatory scrutiny and potential market volatility for Ethereum investors, as the Commission continues to evaluate the implications of allowing staking features within ETFs.