The Cboe BZX Exchange has submitted a request to the US Securities and Exchange Commission (SEC) to enable staking for the 21Shares Core Ethereum exchange-traded fund (ETF), according to a Feb. 12 filing.
If approved, the ETF would stake its Ethereum (ETH) holdings, allowing investors to earn staking rewards.
Regulatory hurdles
Staking is integral to Ethereum’s proof-of-stake (PoS) consensus mechanism, where participants lock up ETH to validate network transactions and earn rewards.
In 2024, the SEC approved several Ethereum ETFs but explicitly prohibited staking. The regulator cited concerns that staking could violate federal securities laws, aligning with its broader stance that staking services resemble unregistered securities offerings.
This position had led to enforcement actions against Coinbase and Kraken, both accused of operating unlawful staking programs.
To mitigate regulatory concerns, Cboe proposes using “point-and-click staking.” Unlike traditional staking models where ETH is transferred to third parties, this approach allows the ETF to stake its holdings without moving the assets from its custody wallet.
This setup reduces the risk of theft, although it does not eliminate potential slashing penalties—a process where staked ETH is partially or fully forfeited due to network rule violations.
The firm also explained that excluding staking from the 21Shares Core Ethereum ETF is akin to an equity exchange-traded product (ETP) declining dividends from its underlying assets.
It asserts that staking ETH would enhance investor returns, improve the ETF’s ability to track Ethereum’s performance and optimize the fund’s creation and redemption process.
Will it be approved?
This filing marks the first time a US-listed crypto ETF has requested staking privileges. If approved, it could set a precedent for other funds looking to integrate staking rewards into their offerings.
Optimism has grown following recent leadership changes at the SEC, which some view as more open to crypto-related financial products. Commissioner Hester Peirce, a known advocate for crypto innovation, has previously suggested that staking in Ethereum ETFs remains a topic open for discussion.
Meanwhile, Bloomberg ETF analyst James Seyffart predicts that if the SEC acknowledges the filing, the final approval or rejection deadline will fall around October.
If successful, this move could reshape the landscape for Ethereum-based investment products and create new opportunities for investors seeking exposure to staking rewards within a regulated ETF structure.
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