As the Securities and Exchange Commission (SEC) mulls applications for spot Ethereum ETFs—with analysts expecting approval as soon as this week—amended filings from several asset managers have dropped their language around staking.
Staking refers to the process through which users delegate Ethereum tokens to the network in exchange for rewards. It became a core component of Ethereum’s security model with the network’s long-planned shift to a proof-of-stake consensus model in 2022.
Fidelity dropped language regarding the staking of customer funds in its proposed ETF, submitting an amended filing on Tuesday. The measure mirrored a similar move made by Ark Invest/21 Shares, which erased staking mentions earlier this month from its application, which the SEC is due to decide on this week.
“Spot Ethereum ETF filers bent the knee by removing staking language to appease a recently humbled SEC,” 3iQ Head Of Research Mark Connors told Decrypt. “We see the removal of staking language as a temporary concession.”
If spot Ethereum ETFs get a regulatory green light, then that could mean a significant portion of Ethereum’s supply rests idled in any approved funds. As of this writing, about 27% of Ethereum’s supply—or 32 million ETH—is staked, according to a Dune dashboard.
Though the SEC appears open to approving spot Ethereum ETFs, as the regulator engages meaningfully with asset managers, staking has emerged as a contentious aspect of Ethereum over the past two years. In lawsuits, the regulator has alleged that Ethereum staking services constitute securities offerings on behalf of several firms.
SEC Chair Gary Gensler spoke specifically about staking services in an agency video a year ago, arguing that investors deserve certain disclosures on how crypto is handled by companies when staked, such as if funds are commingled.
In other regions, such as Canada, funds that hold staked Ethereum have shown that it can be done. Two of 3iQ’s exchange-traded products, for example, began offering customers the benefits of Ethereum staking in 2023.
Connors said the change in the SEC’s posture must be due to political pressure the agency faces over SAB 121, a crypto-custody rule that lawmakers voted last week to erase.
“The SEC’s regulation by enforcement method is clearly under assault,” he said.
Edited by Andrew Hayward
