SEC Challenges ETF Status of Proposed Staked Solana and Ether Funds

The SEC has raised concerns about the structure of proposed Solana (SOL) and Ether (ETH) staked exchange-traded funds (ETFs). The U.S. Securities and Exchange Commission (SEC) has raised issues about the structure of proposed Solana (SOL) and Ether (ETH) staked exchange-traded funds (ETFs), arguing that the products might not qualify as ETFs under existing regulations. ETF provider REX Financial and asset manager Osprey Funds recently filed changes for the funds’ registration. However, the SEC flagged the use of a c-corporation (c-corp) structure, a rare option for ETFs, as conflicting with Regulation 6C-11, commonly referred to as the “ETF rule,” which specifies allowed fund structures.

Despite the regulatory pushback, experts remain confident. “REX lawyers state they can work it out,” Bloomberg ETF expert Eric Balchunas noted in a May 31 post on X. Market participants are closely monitoring the progress of altcoin and staking-based ETFs, seeing them as a potential entry point for fresh institutional capital into the crypto sector.

The SEC’s caution comes even after it clarified earlier this year that crypto staking, in itself, does not constitute a securities transaction. Still, the agency has delayed decisions on several staking and altcoin ETF applications. These delays are not unexpected. “Almost all of these filings have final deadlines in October,” Bloomberg analyst James Seyffart wrote. “It is unusual for ETF applications to be approved so early.”

As reported, BlackRock’s iShares Bitcoin Trust (IBIT) recorded $430.8 million in outflows on May 30, ending a 31-day inflow streak– its longest since launch. Despite the pullback, IBIT’s total Bitcoin holdings now stand at around $70 billion. The outflows were part of a wider trend across U.S. space Bitcoin ETFs, which saw $616.1 million in net redemptions on May 30– the second consecutive day of outflows.