The U.S. Securities and Exchange Commission (SEC) has announced extension of the decision timeline for Grayscale’s proposal to change its Ethereum Trust ETFs to permit staking of Ether held by the trusts. The proposal was filed by NYSE Arca on February 14, 2025, where the company wants to introduce staking capabilities. If approved, this will allow investors to earn rewards while maintaining existing custody arrangements.
The agency has now designated June 1, 2025 as the deadline for a final decision on whether to approve, disapprove, or initiate further proceedings regarding the proposal.
SEC Review Process
The proposed rule change was said to be published for public comment in the Federal Register on March 3, 2025. Under Section 19(b)(2) of the Securities Exchange Act of 1934, the agency is supposed to take action within 45 days of publication or has to extend this period up to 90 days if deemed necessary.
The initial deadline was set to be April 17, 2025, but now has been extended to June 1, 2025. This will provide sufficient time for the agency to have a careful look at the comments and evaluate the outcomes of staking within ETFs.
Regulatory Concerns
The extension reflects that the agency is being cautious about integrating staking feature into the traditional financial instrument.
With staking, the cryptocurrency assets has to be locked to support blockchain operation and earn rewards. This process is raising questions about whether this constitutes an investment contract under U.S. securities laws or not.
Historically, the agency has always proceeded with precautions and delayed the process of reviewal whenever there has been a concern regarding investor protection, market manipulation risks and regulatory uncertainties.
Impact on Crypto Market
Grayscale’s proposal of enabling staking rewards within regulated ETFs has been aiming to bridge decentralized finance (DeFi) with traditional finance. If this proposal is approved, this could gather a significant amount of institutional interest in Ethereum and other crypto assets as well.
However, the delay that has been implemented by the agency may slow down innovation within the crypto space.
Despite regulatory uncertainties, the change in leadership is unlikely to halt innovation in the crypto space. If the proposal poses no significant threat to the investors and is in compliance with regulatory guidelines , there are chances that the agency may be more inclined to approve it.
SEC’s decision on June 1 will be closely watched by the industry observers and approval of this proposal could make way for more sophisticated investment products to be incorporated within the DeFi ecosystem.
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