- SEC delays decision on Grayscale Ethereum ETF staking until July using its 90-day extension right.
- Grayscale aims to add staking to its Ethereum funds without involving investor assets in the process.
- Ethereum ETFs with staking face regulatory uncertainty as market value drops and global tensions increase.
The U.S. Securities and Exchange Commission (SEC) has delayed its decision on Grayscale’s request to enable staking for its Ethereum exchange-traded funds (ETFs). The extension pushes the deadline for a final ruling to July 2025.
Grayscale wants to allow staking in two investment products: the Ethereum Trust and the Ethereum Mini Trust. These funds are both linked to Ethereum and currently do not participate in staking.
The proposed change aims to let Grayscale, acting as the sponsor, stake Ethereum held in the funds. Coinbase Custody would continue to securely hold the underlying ETH assets.
The SEC was originally set to issue a decision by April 17. However, it extended the review period under authority granted by the Securities Exchange Act of 1934. The commission now has until July to approve, reject, or request more input.
Grayscale filed the proposal through NYSE Arca on February 14. The application seeks permission for the ETFs to participate in Ethereum’s proof-of-stake network while retaining existing custody protections.
Staking and Regulatory Concerns
Staking allows participants to help validate transactions on blockchain networks. The process allows users to earn supplementary cryptocurrency rewards as part of their participation. The Ethereum system adopted proof-of-stake methods in 2022, which established staking as its core functionality.
The growing use of staking in crypto markets has failed to convince regulators to approve any U.S.-listed ETF that would participate in it. The SEC maintains a cautious stance because they see potential security issues and worry about investor protection.
The regulator’s hesitation follows a broader pattern. Several similar proposals from other financial firms have also faced delays or rejections.
Grayscale emphasized that investor funds would remain separate from staking operations. The staking process would be managed entirely by the fund sponsor, with no direct exposure for shareholders.
Market Conditions and Broader Context
This decision happens during an unstable period for the crypto market. Recent trade tensions between the United States and China coincide with the start of this administrative hold. Changing market conditions alongside regulatory changes seem to have resulted in the SEC’s delayed ruling.
The SEC acknowledged the application two weeks after it was filed. Grayscale’s proposal marks a new step in integrating crypto features into regulated investment vehicles. The SEC’s eventual decision could set a precedent for how other ETF issuers approach staking in the future.
