Cboe Seeks SEC Approval for Ethereum ETF Staking Integration

• Cboe files with the SEC to add staking rewards to 21Shares Ethereum ETF.
• If the SEC approves it, 21Shares ETF may offer ETH price gains plus staking yields.
• The filing marks the first U.S. proposal combining ETH ETF and staking rewards.

Cboe BZX Exchange has filed a new proposal with the SEC to allow staking capabilities within the 21Shares Core Ethereum ETF. This marks the first attempt to combine ETF structure with Ethereum staking rewards in the U.S. market.

The Form 19b-4 filing was submitted Wednesday and mentions plans to modify existing rules that would allow the ETF’s trust to participate in Ethereum staking. Staking is a mechanism where ETH holders can earn yields by contributing to network security. ETF analyst James Seyffart noted this submission as the first of its kind seeking SEC approval for staking integration.

This development is quite different from the initial ETH ETF approvals, where issuers including 21Shares, BlackRock, and Fidelity deliberately exclude staking features to secure regulatory approval. The previous SEC administration under Gary Gensler had classified proof-of-stake tokens as securities, leading ETF providers to avoid staking functionality.

The timing aligns with changing regulatory perspectives under the Trump administration, where the SEC has established a dedicated crypto task force and shown openness to classifying certain tokens as non-securities. This regulatory change may create a more favorable environment for staking-enabled ETF products.

The integration of staking could address a key limitation of current ETH ETFs by offering investors exposure to staking yields. This will likely bridge the gap between direct ETH ownership and ETF investment. This feature allows ETF holders to benefit from both price appreciation and network participation rewards.

Related: Goldman Sachs Boosts Bitcoin, Ethereum ETF Holdings to $2B

However, the proposal faces regulatory scrutiny due to the complexities of staking under the Howey Test. The Howey Test is the SEC’s framework for determining if an investment qualifies as a security. Staking involves locking cryptocurrency to secure the network while expecting profits from others’ efforts, potentially triggering securities classification.

If approved, this amendment could set an example for other cryptocurrency ETF providers to include staking features. This could potentially help in changing the sector of regulated crypto investment products. The SEC’s response to this filing will likely influence the future integration of blockchain network participation features within traditional investment vehicles.

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