SEC Does Something It Seldom Does: Issues Unfavorable Viewpoints on ETF Applications for 2 Altcoins

A groundbreaking attempt to introduce cryptocurrency-based exchange-traded funds (ETFs) in the United States that provide staking rewards has faced regulatory uncertainty. Two new Ethereum and Solana-focused ETFs planned to be launched by REX Financial and Osprey Funds have received initial registration approval from the U.S. Securities and Exchange Commission (SEC), raising new concerns about the funds’ legal status. The SEC stated the funds in question may not meet the definition of an ‘investment company’ under federal securities laws, meaning they fail to meet one of the standard legal requirements for being listed on an exchange. SEC officials said in a letter to the provider of the ETF Opportunities Trust that the two ETFs may have been falsely registered as ‘investment companies’ and that the statements they made may have been misleading. The funds aimed to allow investors to earn staking rewards on cryptocurrencies such as Ethereum and Solana. ‘We believe we can resolve the SEC’s concerns regarding the investment company definition and do not plan to float the funds until this issue is resolved,’ REX Financial General Counsel Greg Collett said in a statement. The SEC declined to comment beyond the letter’s content. ‘Even if the SEC does not allow this structure to be listed, we believe that simpler ETF attempts that involve staking will be successful. It’s just a matter of time. The SEC doesn’t seem to like the way REX is moving these applications forward,’ said James Seyffart, an ETF analyst at Bloomberg Intelligence. This is the SEC’s second overt crackdown on ETFs that invest in alternative asset classes in recent months. In March, the SEC publicly criticized the world’s first ETF investing in the private credit market, offered by State Street Corp. and Apollo Global Management, just hours after it began trading. REX announced yesterday that it had received ‘active registration’ for the two ETFs in question and that the funds can now be traded on the exchange. REX founder Greg King stated that both funds were scheduled to be launched in mid-June. ‘Until these concerns are resolved, appropriate measures will be taken to ensure compliance with the federal securities laws,’ the SEC said in its letter. * This is not investment advice.