SEC Challenges ETF Status of Proposed Staked Solana and Ether Funds

Key Takeaways:

• The SEC has questioned the structure of proposed staked Solana and Ether ETFs.
• The agency flagged the C-corp structure as conflicting with ETF regulations.
• Final decisions on staking ETFs are likely delayed until October.

The U.S. Securities and Exchange Commission (SEC) has raised concerns about the structure of proposed Solana (SOL) and Ether (ETH) staked exchange-traded funds (ETFs), arguing that the products may not qualify as ETFs under current regulations.

ETF provider REX Financial and asset manager Osprey Funds recently submitted amendments for the funds’ registration.

However, according to Bloomberg, the SEC flagged the use of a c-corporation (c-corp) structure, a rare choice for ETFs, as conflicting with Rule 6C-11, commonly referred to as the “ETF rule,” which defines permitted fund structures.

The SEC staff said they continue to have unresolved questions about whether the proposed funds, if structured and operated as planned, meet the definition of an “investment company” under the Investment Company Act, according to a letter dated May 30.

The letter further warned that disclosures about the funds’ investment company status “may be potentially misleading.”

Despite the regulatory pushback, analysts remain hopeful. “REX lawyers say they can work it out,” Bloomberg ETF analyst Eric Balchunas noted in a May 31 post on X.

“Issuers are pushing the envelope hard in an effort to get first to market.”

Update: SEC sent letter to REX last night saying it was concerned SEC improperly filed. REX lawyer says they can work it out. Feels a bit like the $PRIV situation. Issuers pushing envelope hard in effort to get first to mkt. Saturday scoop from @isabelletanlee https://t.co/6fnYf5Oo2V pic.twitter.com/NHTvOQyDsO

Market participants are closely tracking the progress of altcoin and staking-based ETFs, viewing them as a potential gateway for fresh institutional capital to enter the crypto sector.

The SEC’s caution comes even after it clarified earlier this year that crypto staking, in itself, does not constitute a securities transaction.

Still, the agency has delayed rulings on several staking and altcoin ETF applications.

These delays are not unexpected. “Almost all of these filings have final due dates in October,” Bloomberg analyst James Seyffart wrote.

“It is uncommon for ETF applications to be approved so early.”

As reported, BlackRock’s iShares Bitcoin Trust (IBIT) recorded $430.8 million in outflows on May 30, ending a 31-day inflow streak — its longest since launch.

The move marks IBIT’s largest single-day outflow to date, according to Farside data, following a month where BlackRock added $6.2 billion in Bitcoin.

Despite the pullback, IBIT’s total Bitcoin holdings now stand at around $70 billion.

The outflows were part of a broader trend across U.S. spot Bitcoin ETFs, which saw $616.1 million in net redemptions on May 30 — the second consecutive day of outflows.

The previous day had seen $346.8 million withdrawn. Notably, BlackRock was the only issuer to post inflows on May 29, even as others saw redemptions.

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