Quick overview

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Regulators are raising concerns about a potentially historic attempt to introduce U.S. cryptocurrency exchange-traded funds with staking rewards.

Staking exposure, which allows investors to earn profits by pledging tokens to support the blockchain’s operation, is what REX Financial and Osprey Funds hope to introduce with their ETFs tracking Ethereum and Solana.

 

U.S. regulators say the vehicles may not even be considered ETFs under federal securities law.

The Securities and Exchange Commission staff informed ETF Opportunities Trust, which issues various ETFs, including those managed by companies like REX, in a letter dated late Friday that the two ETFs might not qualify as investment companies, a legal requirement for the funds to be listed on the stock market.

The SEC expressed concern that the funds “filed their registration statement improperly” and that their disclosures about the funds’ status as investment companies might be deceptive.

Greg Collett, general counsel at REX Financial, stated, “We believe we can satisfy the SEC on the investment company question, and we don’t intend to launch the funds until we do that.” 

The situation, according to SEC Commissioner Caroline Crenshaw, the commission’s only Democrat and a vocal opponent of its new stance on cryptocurrency during President Donald Trump’s administration, is representative of the agency’s recent fragmented approach to crypto regulation.

This is the second time the regulator has publicly expressed skepticism about a listed fund investing in alternative asset classes.

It criticized a State Street Corp. ETF in March, and Apollo Global Management, the first private credit investor in history, just hours after the fund went public.