Will the SEC Approve Grayscale’s Ethereum ETF Staking Proposal?

• Staking within ETFs could boost investor returns through passive income.
• The SEC’s decision will set a key precedent for staking in regulated products.

The U.S. Securities and Exchange Commission (SEC) is reviewing a proposal from Grayscale Investments to include staking in its proposed Ethereum ETFs. If approved, this could change how investors engage with Ethereum.

The proposal was officially acknowledged by the SEC after NYSE Arca submitted it on February 14, 2025. This started the review process, which included a public comment period. The SEC has 45 days to make an initial decision, but this can be extended to 90 days. If approved, investors could earn staking rewards while holding shares of the Ethereum ETF.

Staking is a central component of decentralized finance (DeFi). It involves locking up crypto to support a blockchain network with participants earning rewards. Grayscale aims to integrate staking into the regulated ETF framework, potentially bridging traditional finance and DeFi.

“Unlike Bitcoin, Ethereum is not a finite token. Therefore, staking is arguably the biggest value proposition of ETH to major investors,” according to the filing. This suggests staking could attract more investors to Ethereum ETFs. ETFs offer a familiar structure for yield generation. This could draw in institutions previously wary of direct staking.

Grayscale plans to stake Ethereum through trusted providers. The ETF sponsor will manage this. Coinbase Custody will continue to hold the fund’s Ethereum. This approach balances innovation with regulatory needs.

A Shifting Regulatory Landscape?

The SEC’s review comes amid evolving perspectives on cryptocurrency regulation. While the agency has previously exercised caution regarding staking, recent developments indicate an increasing openness toward this technology.

Journalist Eleanor Terrett noted on X that the SEC is “very, very interested” in staking. The agency is seeking input from experts. This suggests the SEC wants to understand staking’s nuances and its impact on investors and markets.

However, the SEC will examine investor’s security and market oversight, custody arrangements, and important disclosures before reaching a conclusion. This comprehensive review process is mandatory for the SEC to provide a strong regulatory framework for cryptocurrency products.

Potential Increase in Ethereum’s Overall Value

Approval of Ethereum ETF staking could profoundly affect the Ethereum ecosystem and its native token, potentially attracting increased institutional investment and strengthening the network.

The filing also suggests, “Should staking rewards finally be enabled on ETH ETF markets, a steady flow of inflow optimism could soon snowball into a long-awaited bull run on ETH.” This highlights staking’s potential to fuel Ethereum’s growth, increase demand, and encourage participation.

ETFs could also make staking more accessible. Direct staking can be complex. ETFs could simplify it, bringing staking benefits to a broader audience. The crypto world awaits the SEC’s decision. A positive outcome would validate integrating staking into ETFs.

Currently, Ethereum struggles below the $2,500 zone, trading at $2,487. Ethereum’s recent decline has been fueled by a $1.4 billion Bybit hack and investor doubt, causing a bearish pattern for ETH and the overall crypto market. 

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