How does one measure the SEC’s evolving relationship with cryptocurrency ETFs when the regulatory landscape shifts with the frequency of a day trader’s portfolio? The Commission faces an unprecedented challenge: reviewing over 70 crypto ETF proposals scheduled for 2025, spanning everything from established altcoins to meme coins (because apparently Dogecoin deserves its own investment vehicle).
The regulatory winds have shifted considerably since January 2025, when the SEC established its Crypto Task Force and began replacing its enforcement-heavy approach with something resembling actual guidance. This transformation—driven partly by persistent industry advocacy—promises a regulatory report “within the next few months,” though seasoned observers might wonder if SEC timelines follow standard calendars.
At the heart of this regulatory puzzle lies staking rewards, a mechanism integral to proof-of-stake cryptocurrencies that has the SEC questioning whether ETFs offering such features deserve approval. The Commission’s skepticism particularly affects asset managers like REX Financial and Osprey Funds, whose staking-enabled products face regulatory friction despite preliminary approvals. The fundamental question remains: Is protocol staking merely a blockchain operational function, or does it constitute investment activity requiring additional oversight? Bloomberg has reported that the SEC is currently questioning the eligibility of two cryptocurrency ETFs that specifically offer staking rewards.
Protocol staking’s regulatory classification—operational necessity or investment activity—remains the pivotal question determining crypto ETF approvals.
Industry advocates, led by groups like the Crypto Council, herald the new guidance as “major step forward”—though one might note that regulatory evolution often masquerades as revolution in the crypto space. Their argument centers on distinguishing staking as core blockchain infrastructure rather than speculative investment activity, a distinction that could determine whether these products reach retail investors by late 2025. Unlike traditional staking mechanisms, cryptocurrency interest rewards through approved ETFs would provide institutional-grade access to these yield-generating strategies without direct crypto custody requirements.
The SEC’s focus on investor protection drives much of this scrutiny, with particular emphasis on transparency in staking mechanisms and custody solutions for staked assets. Questions about security, disclosure requirements, and retail market suitability continue shaping regulatory dialogue, while Cboe Exchange files self-regulatory proposals under Section 19 to establish clearer frameworks. Paul Atkins, recently sworn in as the new SEC chair, brings a deregulatory stance that stakeholders hope will facilitate more collaborative oversight of the crypto sector.
This iterative process—characterized by continuous feedback between exchanges and regulators—suggests that approval or denial of staking ETFs could greatly influence institutional crypto adoption. The market awaits clarity from the Crypto Task Force, knowing that regulatory alignment with industry innovation remains essential for product development in this evolving landscape.
