SEC's Staking Stalemate: ETFs Navigate Legal Labyrinth as Crypto Awaits Clarity

The U.S. cryptocurrency market is navigating a pivotal shift as Ethereum staking ETFs enter the spotlight amid regulatory scrutiny and evolving investor demand. REX-Osprey™, a joint initiative between REX Shares and Osprey Funds, launched the first Ethereum staking ETF, ESK, in September 2025, offering investors exposure to spot Ethereum and monthly staking rewardsREX-Osprey Launches First Ethereum Staking ETF in the U.S.^[1]. The fund’s structure combines direct staked ETH with exchange-traded products holding and staking ETH, with all staking rewards distributed to investorsREX-Osprey Launches First Ethereum Staking ETF in the U.S.^[1]. This innovation follows the successful debut of the REX-Osprey™ Solana + Staking ETF (SSK) in July 2025, which has attracted over $300 million in assets under managementREX-Osprey Launches First Ethereum Staking ETF in the U.S.^[1].

The launch of these ETFs reflects a strategic bypass of traditional regulatory pathways. By structuring ESK and SSK as 1940 Act funds with Cayman Islands subsidiaries, REX-Osprey™ sidestepped the SEC’s 19b-4 approval process, a move Bloomberg analyst James Seyffart described as a “clever legal workaround”REX Shares Files Innovative ETFs for ETH, SOL Staking^[3]. This approach allows the funds to hold and stake ETH and SOL while complying with U.S. regulations. However, the C-corporation structure introduces tax inefficiencies, as corporate income taxes reduce net returns for investorsREX Shares Files Innovative ETFs for ETH, SOL Staking^[3].

The SEC’s cautious stance on staking ETFs has created uncertainty. In September 2025, the commission delayed decisions on Ethereum staking proposals from BlackRock, Fidelity, and Franklin Templeton, pushing final rulings to October and November 2025SEC Delays Ethereum Staking ETF Approvals to October 2025^[4]. The SEC cited the need for additional time to evaluate risks, including custody challenges, market manipulation, and the classification of staking rewards. BlackRock’s iShares Ethereum Trust, for instance, now awaits approval by October 30, 2025, while Fidelity’s and Franklin Templeton’s proposals are extended to NovemberSEC Delays Decision On Staking For BlackRock’s Ethereum ETF^[6].

Market dynamics are influenced by these regulatory delays. Ethereum’s price reached $4,100 in September 2025, driven by institutional interest in spot ETFs but constrained by the absence of staking featuresSEC Delays Ethereum Staking ETF Approvals to October 2025^[4]. Analysts note that staking-enabled ETFs could unlock new capital inflows by offering yield generation alongside price exposure, a feature currently absent in traditional crypto productsSEC Delays Ethereum ETF Staking: What’s Next? - capwolf.com^[5]. The REX-Osprey™ model, which distributes staking rewards directly to investors, has already demonstrated traction, with SSK’s $33 million trading volume on its debut day.

Despite regulatory hurdles, industry experts anticipate broader adoption of staking ETFs. Seyffart highlighted that the SEC’s proposed Generic Listing Standards, which could streamline approvals for crypto ETFs, may facilitate faster market entry for future productsREX Shares Files Innovative ETFs for ETH, SOL Staking^[3]. However, the current focus on Ethereum and Solana staking ETFs underscores the sector’s potential to redefine institutional participation in crypto markets. As of September 2025, over 90 crypto ETF applications remain pending, with the SEC’s cautious approach reflecting ongoing debates about balancing innovation with investor protectionSEC Delays Decision On Staking For BlackRock’s Ethereum ETF^[6].

The interplay between regulatory delays and market demand highlights Ethereum’s evolving cost basis for investors. While spot ETFs have driven institutional adoption, the absence of staking features limits yield opportunities. REX-Osprey™’s model, which integrates staking rewards within a regulated framework, addresses this gap but introduces structural complexities. The SEC’s eventual approval or rejection of staking ETFs will likely determine whether Ethereum’s cost basis shifts toward a more competitive yield-driven model, aligning with broader trends in institutional crypto participation.