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US SEC Extends First Decision Deadline on Adding Staking to the Grayscale Ethereum ETFs
The US Securities and Exchange Commission has delayed a decision on Grayscale’s request to add staking services to its Ethereum ETFs. In an April 14 notice, the Wall Street’s top regulator disclosed that it is extending the first deadline on the decision by 45 days. The US SEC took a proactive move on Monday, announcing the delay three days before the actual decision date.
Grayscale would now wait until July 1 to know the SEC’s next course of action. Meanwhile, the final deadline for an SEC decision on the rule change request is in late October.
US SEC Postponed Decision
For context, the New York Stock Exchange (NYSE) Arcafileda rule change request with the US SEC on February 14, seeking to amend the listing and trading guidelines of the Grayscale Ethereum ETF (ETHE) and the Grayscale Ethereum Mini ETF (ETH). The submission requested permission to introduce staking services to both US-native Ether investment funds.
The funds, with a net asset of $1.93 billion and $744.5 million, launched in July 2024 with seven other Ethereum spot ETFs. Nonetheless, the launch has failed to live up to the hype, especially compared with similar products tracking Bitcoin’s performance. For context, the Ether ETFs have seen a cumulative net inflow of $2.27 billion, with ETHE contributing negatively with a $4.23 billion net outflow.
Meanwhile, for the uninitiated, staking involves locking up an underlying asset (Ethereum) in a network to become a validator. While staked, the locked assets yield passive income for the user as they aid in processing transactions and improve the network’s security.
As a result, if the SEC approves the application published in the Federal Register on March 3, Grayscale will add staking services to its funds. This means users can decide to lock up their shares on the ETHE and ETH and earn staking rewards for doing so, further improving the attractiveness of these funds.
Notably, the average annual staking reward on-chain ranges between 2.3% and 3.5%, while that of centralized exchanges varies slightly. For context, Binance offers 3.82%, Lido between 3% and 3.28%, and Kraken up to 7%.
Tall Order for the US SEC?
The US SEC has received multiple applications to add staking services to existing Ethereum ETFs. In addition to Grayscale, 21Shares, through the CBOE BZX Exchange, has leveraged the evolving regulatory landscape to make demands of the commission.
Recall that the Wall Street securities watchdog, under Gary Gensler, refuted all attempts to add staking services to the Ethereum funds amid its unregistered security bias during the approval process. However, the new hierarchy has attempted to understudy the pros and cons of introducing staking following contacts with Jito Labs and Multicoin Capital.
However, the recent extension may have raised skepticism among market observers, who cite mixed feelings within the regulator’s camp. Nonetheless, prominent ETF analyst James Seyffart expects a favorable decision by the fourth quarter of the year.
Moreover, the SEC’s recent approval of options trading on the Ethereum spot ETFs on Nasdaq and NYSE has further fueled optimism that the regulator will sanction staking too.
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