SEC acknowledged NYSE Arca filing for Grayscale’s Ethereum ETFs to earn staking rewards
Proposal maintains custodial control with staked ETH not leaving wallet holdings
Grayscale expanding crypto ETF portfolio with recent XRP, Cardano, and Polkadot filings
SEC expected to make decision by May 26, 2025, with up to 90-day review period possible
Staking would be done exclusively by Grayscale without pooling ETH with other validators
The Securities and Exchange Commission (SEC) has acknowledged a filing from NYSE Arca that would allow Grayscale’s Ethereum exchange-traded funds to earn staking rewards. The proposal, submitted on February 14 and published by the SEC on February 25, 2025, seeks to enable the Grayscale Ethereum Trust ETF and Grayscale Ethereum Mini Trust ETF to participate in Ethereum’s proof-of-stake validation system.
Under the proposed rule change, Grayscale would stake a portion of the ETFs’ Ethereum holdings through trusted staking providers. These providers could include the current custodian or its affiliates but would not include any Grayscale affiliates. The proposal specifies that the staking process would be managed solely by Grayscale as the fund’s sponsor, without pooling Ethereum with other entities.
“The Sponsor may, from time to time, stake a portion of the Trust’s Ethereum on behalf of the Trust through one or more trusted staking providers,” the filing reads. This approach differs from “delegated staking” services that have faced regulatory challenges in the past.
A key aspect of the proposal is that staked Ethereum would remain under custodial control, addressing security concerns that have previously complicated regulatory approval for such activities. “Staking by the sponsor will not result in the Ethereum held by the Trust moving out of the custody of the Custodian,” the filing explains. “This process does not involve the staked Ethereum leaving the wallet at which it is held.”
The ETFs would earn rewards in the form of additional ETH through the staking process. These additional funds would be considered as income for the fund. Coinbase Custody will continue to secure the fund’s Ethereum holdings, maintaining the current security framework in place.
Ethereum staking involves users locking up their ETH to become co-validators, helping to secure the network while earning ETH as a reward. This feature has become an integral part of Ethereum since its transition to proof-of-stake in 2022 with an event known as The Merge.
If approved, the change would help Grayscale’s ETFs track returns associated with holding Ethereum more effectively. The SEC will have 45 days to approve, disapprove, or extend its review period, with a decision expected by May 26, 2025. The review timeline could extend up to 90 days based on regulatory considerations.
Grayscale has been exploring the addition of staking to its Ethereum ETF for some time. In March 2024, the company proposed a similar staking structure following Fidelity’s initiative, but regulatory complexities delayed its approval.
The SEC has previously raised concerns about staking, particularly regarding whether it qualifies as an investment contract under U.S. securities laws. However, recent reports indicate that the agency is actively engaging with industry players to better understand the different forms of staking and their benefits.
Eleanor Terrett, a journalist, stated on social media platform X (formerly Twitter) that the SEC has shown a “very, very interested” stance on staking and has been asking industry experts for additional insights. She connected this interest to other SEC actions, noting that “Given the SEC’s newfound interest in staking, it seems logical that it will also reconsider its lawsuit against Consensys, which it sued last year over its MetaMask staking service.”
Regulatory Developments and Market Implications
The SEC’s acknowledgment of Grayscale’s proposal comes amid similar developments in the industry. The agency recently accepted a proposal from 21Shares for staking in its Core Ethereum ETF, suggesting growing interest in integrating staking into regulated investment products.
This proposal is part of Grayscale’s broader expansion of its cryptocurrency ETF offerings. The digital asset management firm has been on a filing spree, submitting multiple crypto ETF applications this year. These include proposals for XRP, Cardano, and Polkadot, as Grayscale seeks to expand its portfolio beyond Bitcoin and Ethereum.
The filing for Grayscale’s proposed XRP exchange-traded fund has already hit the SEC’s Federal Register, triggering a 21-day comment period. The regulator is expected to make a decision on the XRP ETF by October 18, 2025.
Additionally, the SEC has started reviewing Grayscale’s filing for a spot Cardano (ADA) ETF. If approved, it would allow investors to gain exposure to Cardano without directly holding the asset.
Market observers have noted that shifting aspirations for a new regulatory approach under President Donald Trump’s administration may be paving the way for issuers to submit fresh applications. Companies are betting on a more favorable regulatory environment under a potentially revamped SEC leadership.
Meanwhile, the SEC has dropped its investigation into Robinhood’s crypto unit and the Uniswap exchange, indicating a possible shift in its regulatory approach. These decisions may influence how the agency evaluates staking within ETFs.
With the SEC’s review process now underway, investors and industry stakeholders are closely watching for updates. The decision could have implications for how regulated investment vehicles participate in blockchain networks’ validation processes while maintaining investor protections.
This articles is written by : Nermeen Nabil Khear Abdelmalak
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