The SEC is raising legal red flags over two proposed crypto ETFs tied to staking rewards, both of which had just cleared initial registration steps.
The challenge came Friday evening when the Securities and Exchange Commission told ETF Opportunities Trust — the entity responsible for registering funds managed by REX Financial and Osprey Funds — that the new Ethereum and Solana staking ETFs may not qualify as legal investment companies under federal law. This call into question their ability to list on public markets.
Both ETFs aim to give investors access to staking yields by tracking Ethereum and Solana, while also passing staking income back to shareholders. But the SEC said the filings were “improperly filed” and warned that the registration documents might be “potentially misleading” about the funds’ legal status. The funds had claimed they met the definition of an investment company, but the SEC says that’s not a given.
In a formal letter sent on Saturday, the Commission said it might take further steps “to ensure compliance with the federal securities laws” if the situation is not resolved. While the funds had technically received effective registration earlier on Friday, meaning they could have gone live at any time, that launch is now stalled.
SEC flags ETF structure and staking disclosures
Greg Collett, general counsel at REX Financial, said the firm isn’t backing away. “We think we can satisfy the SEC on the investment company question, and we don’t intend to launch the funds until we do that.” REX had hoped to get the products trading by mid-June, according to Greg King, the firm’s founder. Now, everything is paused until the SEC gives a clear go-ahead.
James Seyffart, an ETF analyst at Bloomberg Intelligence, said the Commission’s objection may be specific to the filing strategy REX used. “Even if the SEC doesn’t allow this structure to list, we still believe the more straightforward attempts to allow staking in a US ETF will ultimately be successful,” he said. “It’s a matter of when, not if. But the SEC doesn’t seem to be a fan of the way Rex tried to push these listings through.”
This is the second time in just a few months that the SEC has stepped in after a fund tried to go public with a structure it didn’t like. In March, the agency publicly pushed back on a private credit ETF managed by State Street Corp. and Apollo Global Management — the first of its kind — only hours after it listed. That product had to deal with similar regulatory issues around classification.
The new staking ETFs attempt to blend traditional investment products with crypto-native features like yield from validating transactions. But the SEC doesn’t consider staking returns to be straightforward income, and is clearly uncomfortable with listing a product that generates money in a way they don’t fully regulate. The legal uncertainty around staking continues to block more complex crypto offerings.
Bitcoin ETFs attract billions while gold-backed funds bleed
As the SEC slams the brakes on staking products, Bitcoin ETFs are pulling in serious capital. Over the past five weeks, US Bitcoin ETFs have seen more than $9 billion in inflows, led by BlackRock’s iShares Bitcoin Trust (IBIT). On the flip side, gold ETFs have been bleeding money — losing more than $2.8 billion in the same timeframe.
This comes as Bitcoin hit an all-time high of $111,980 earlier this month. That rally followed positive movement on regulatory issues — especially new momentum around a stablecoin bill — and mounting concern over the United States’ fiscal position under President Donald Trump’s second term.
Investors are seeing Bitcoin as a hedge, not just a bet. Even though gold is still up more than 25% for the year, it’s down nearly $190 from recent highs.
Some analysts see this shift as long-term. Christopher Wood, global equity strategist at Jefferies, said, “I remain bullish on both gold and Bitcoin. They remain the best hedges on currency debasement in the G7 world.” But others aren’t convinced Bitcoin can be counted on during market stress.
Critics point out that during major events — like the August unwinding of the yen carry trade — Bitcoin dropped sharply alongside other risky assets. That kind of volatility continues to make the SEC wary of expanding crypto exposure through mainstream investment products like ETFs.
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