Cboe seeks SEC nod for Ethereum ETF staking feature

The Cboe BZX Exchange, Inc. submitted a request for a major change to its 21Shares Core Ethereum exchange-traded fund (ETF). The proposed amendment aims to introduce staking of Ether, the cryptocurrency powering the Ethereum network, The Block reported.

The filing with the U.S. Securities and Exchange Commission (SEC) is a step towards potentially expanding the functionality of the ETF, which currently does not include staking capabilities.

The exchange’s filing indicated that based on discussions with the Sponsor, it seeks to modify several parts of the Eth ETP Amendment No. 2 to permit the staking of Ethereum held by the Trust. This move could allow investors to earn rewards through the process of staking, where cryptocurrency is locked up to support the network and validate transactions.

James Seyffart, an ETF analyst at Bloomberg Intelligence, pointed out that this filing is the first instance of an ETF seeking SEC approval to allow for staking. Seyffart’s remarks suggest cautious optimism about the SEC’s response, given the regulator’s history with staking and the classification of cryptocurrencies.

The SEC had previously approved the 21Shares Core Ethereum ETF, alongside offerings from other firms such as BlackRock (NYSE:BLK) and Fidelity. However, many companies had removed staking from their registration statements in anticipation of the SEC’s decision.

Under the leadership of former SEC Chair Gary Gensler, the commission had indicated that proof-of-stake tokens could be classified as securities. With a change in administration, there appears to be a shift in the SEC’s approach towards cryptocurrencies, including the formation of a dedicated crypto task force and the potential reclassification of certain tokens as "non-securities."

Investors and industry observers are now awaiting the SEC’s response to Cboe’s proposal, which could set a precedent for the inclusion of staking features in ETF products tied to cryptocurrencies.

The SEC’s decision will likely have implications for the broader acceptance and integration of staking mechanisms within regulated investment vehicles.

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