SEC casts doubt on REX‑Osprey bid to launch staking Ethereum, Solana ETFs

The U.S. Securities and Exchange Commission has warned ETF issuers REX Shares and Osprey Funds that their landmark “staking ETF” proposal may not meet the basic legal definition of an exchange‑traded fund, raising the prospect of enforcement or a forced refiling just hours after the products’ registration statement technically went live.

REX Shares and Osprey Funds recently filed to create C-corporation ETFs that would invest in Ethereum and Solana and stake at least half the assets for additional yield generation. 

However, their strategy, which consists of "a bunch of clever legal and regulatory work-arounds," according to Bloomberg Intelligence analyst James Seyffart, has been flagged by the SEC in a recent letter. 

"[Securities and Exchange] Commission staff continues to have unresolved questions whether the Funds, if structured and operated as proposed, would be able to meet the definition of 'investment company' under the Investment Company Act," SEC Associate Director Brent J. Fields wrote in a letter late Friday. 

Fields also revealed that the SEC asked the issuers to delay the effectiveness of the registration statement, which went into effect on Friday. "To the extent that these concerns remain unresolved, the Commission staff will consider the appropriate next steps to ensure compliance with the federal securities laws," Fields wrote. 

The SEC also asked the issuers to make a prior email correspondence from Thursday, May 29, public so that potential investors can review the exchange.  The agency had several rounds of communication with the issuers, the letter reveals. 

“We think we can satisfy the SEC on the investment company question, and we don’t intend to launch the funds until we do that,” Greg Collett, general counsel at REX Financial, told Bloomberg . 

While spot Ethereum ETFs have traded since July of last year, a spot Solana ETF has yet to be approved, meaning the staking Solana ETF has two regulatory hurdles to overcome.