SEC Accepts 21Shares’ ETF Staking Application; Fox Reporter: SEC Shows Strong Interest in Staking

SEC Accepts 21Shares' ETF Staking Application; Fox Reporter: SEC Shows Strong Interest in Staking

SEC Accepts 21Shares' ETF Staking Application; Fox Reporter: SEC Shows Strong Interest in Staking

Table of Contents
Toggle

SEC Accepts 21Shares ETF Staking Application
Obstacles to ETF Participation in Staking
SEC Interested in Token Staking

Cboe BZX Exchange has submitted a 19b-4 filing to the U.S. Securities and Exchange Commission (SEC), seeking approval for the 21Shares Core Ethereum ETF to participate in staking. The application was submitted on February 12 and was formally accepted by the SEC yesterday. If approved, the ETF will be able to stake its holdings of Ethereum (ETH), allowing investors to earn staking rewards.

The staking mechanism is central to Ethereum’s proof-of-stake (PoS) consensus mechanism, where participants must lock up ETH to validate network transactions and earn rewards.
In 2024, although the SEC has approved several Ethereum ETFs, it has explicitly prohibited them from participating in staking. The agency believes that staking may violate federal securities laws and views staking services as unregistered securities offerings. Based on this stance, the SEC has previously taken enforcement actions against Coinbase and Kraken, accusing them of operating illegal staking programs.
To mitigate regulatory risks, Cboe has proposed a “Point-and-Click Staking” mechanism. Unlike traditional staking models that require transferring ETH to a third party, this method allows the ETF to stake directly without moving the assets.
This model reduces the risk of asset theft but cannot completely avoid slashing penalties, which involve the confiscation of some or all staked ETH due to violations of network rules.
Cboe further explained that if the 21Shares Core Ethereum ETF does not participate in staking, it would be akin to an equity-based ETP forfeiting its underlying asset’s dividend income. The company believes that staking ETH not only enhances investor returns but also improves the ETF’s ability to track Ethereum market performance and optimizes the fund’s creation and redemption processes.

In response to this news, Fox Business reporter Eleanor Terrett revealed that the current SEC working group is quite interested in the “staking mechanism.” Eleanor Terrett wrote:
“According to a knowledgeable source who recently spoke with the U.S. Securities and Exchange Commission (SEC), the agency is ‘very, very interested’ in staking and has even requested the industry to provide a memorandum detailing the different types of staking and their advantages.”
Additionally, the source disclosed that the SEC may release guidance related to staking in the near future, as it has become a topic of active interest for them.