Crypto Task Force Considers ETF Staking—A Game Changer for Crypto ETFs?

• The SEC crypto task force met with Jito Labs and Multicoin Capital on February 5 to discuss the inclusion of staking in exchange-traded products and potential models for its implementation.
• Experts suggest that allowing staking in ETFs could drive greater institutional adoption of cryptocurrencies by incorporating staking into traditional financial products.

The U.S. Securities and Exchange Commission (SEC) is considering allowing staking within crypto-related exchange-traded funds (ETFs), a move that could significantly impact the institutional adoption of cryptocurrencies.

This development comes just weeks after the SEC’s newly formed task force began discussions with top crypto executives, including representatives from Jito Labs, one of the largest Solana-based staking platforms, and Multicoin Capital, a crypto investment firm founded in 2017.

SEC Meets with Crypto Executives to Discuss Staking

Jito Labs CEO Lucas Bruder and Multicoin Capital’s Managing Partner Kyle Samani attended the meeting with the SEC on February 5. Although the agency released only a brief five-page summary of the discussion, it confirmed that two potential approaches to staking in ETFs are under active consideration.

The SEC is currently exploring two potential approaches to integrating staking within ETFs. One option is staking a portion of ETF assets, allowing ETFs to stake a certain percentage of their holdings through service providers running validators. The second approach involves liquid staking tokens (LSTs), such as JitoSOL for Solana’s SOL, representing staked assets and enabling un-staking redemption. Staking plays a vital role in proof-of-stake networks by securing the blockchain through locked assets in validator nodes, rewarding participants for their contributions. 

Despite the potential benefits, the SEC remains cautious about allowing staking in ETFs due to several key concerns. One major issue is the unbonding period, as staked assets typically have a lock-up phase that could delay ETF redemptions and complicate liquidity management. Additionally, tax implications remain unclear, as the taxation of staking rewards is still a complex and unresolved regulatory matter. Lastly, the securities classification of staking as a service has long been debated, with concerns over whether it constitutes a securities transaction, raising compliance risks for ETF issuers.

Under previous leadership, particularly former SEC Chair Gary Gensler, staking services were restricted in the U.S. Firms like Kraken were forced to shut down their staking services for American customers, citing regulatory concerns. However, the SEC’s stance appears to be shifting following President Donald Trump’s inauguration. Interim SEC Chair Mark Uyeda, along with pro-crypto Commissioner Hester Peirce, is working to address industry concerns and move away from the previous “regulation by enforcement” approach. A key example of this shift is the SEC’s recent acceptance of 19b-4 filings for XRP ETFs from Grayscale and 21Shares.

Notably, the Cboe BZX Exchange recently proposed allowing staking in the 21Shares Core Ethereum ETF, while the New York Stock Exchange (NYSE) submitted a proposal to introduce staking in Grayscale’s Ethereum ETF. If staking becomes part of regulated crypto ETFs, it could enhance market stability, improve regulatory clarity, and attract more mainstream investment into the space.