When did the simple act of letting cryptocurrency sit idle and earn rewards become a regulatory minefield worthy of federal scrutiny?
The Securities and Exchange Commission has thrust crypto ETFs offering staking rewards into an uncomfortable spotlight, questioning whether these funds can maintain their traditional investment company status under the Investment Company Act.
The regulatory drama centers on proof-of-stake blockchain mechanics—a core function that allows token holders to earn rewards simply by participating in network validation.
Yet the SEC’s Division of Corporation Finance appears conflicted, simultaneously issuing guidance stating that certain staking activities don’t constitute securities while scrutinizing ETF proposals from REX Financial and Osprey Funds for their staking exposure.
The REX-Osprey ETH ETF and REX-Osprey SOL ETF exemplify this regulatory contradiction.
These funds promise investors additional income through staking rewards, which apparently complicates their ETF classification enough to warrant formal SEC intervention.
The commission sent a pointed letter to ETF Opportunities Trust, expressing concerns about potentially misleading disclosures in registration statements—a bureaucratic way of suggesting someone might be playing fast and loose with paperwork.
This scrutiny highlights the curious state of American crypto regulation, where enforcement-focused methods are gradually giving way to actual regulatory clarity (though “gradually” might be generous).
The SEC’s Crypto Task Force is reportedly working toward thorough crypto regulations, with potential staking ETF approvals by late 2025—assuming the regulatory stars align properly.
The industry response reveals predictable optimism despite obvious headwinds.
REX Financial maintains confidence about satisfying SEC concerns, while the Crypto Council celebrates the new staking guidance as meaningful progress.
Whether this constitutes genuine regulatory evolution or merely another chapter in crypto’s ongoing compliance theater remains unclear.
The fundamental question persists: can crypto ETFs offering staking rewards function as traditional investment vehicles without triggering Investment Company Act complications?
The answer will likely determine whether innovation in crypto ETFs proceeds or stalls under regulatory uncertainty. However, Commissioner Crenshaw has raised dissenting concerns about contradictions with court precedents regarding staking arrangements as investment contracts.
Despite the regulatory turbulence, the broader crypto landscape continues its shift from speculation to tangible utility, driven by institutional adoption and technological advancements across the industry.
For now, the SEC seems determined to scrutinize every aspect of staking rewards, transforming what should be straightforward blockchain functionality into a complex regulatory puzzle requiring federal oversight. Bloomberg first reported on this regulatory development on June 2, 2025.
