SEC Raises Concerns Over REX and Osprey’s Proposed Crypto Staking ETFs
The U.S. Securities and Exchange Commission (SEC) has raised significant concerns about REX Financial and Osprey Funds’ proposal to launch the country’s first exchange-traded funds (ETFs) offering crypto staking rewards.
Although the SEC granted initial registration approval last week, the agency is now questioning whether the proposed products meet the legal definition of an ETF under U.S. securities laws, according to Bloomberg.
Legal Uncertainty Around Fund Structure and Staking
The proposed ETFs, which center on Ethereum and Solana and include built-in staking features, have triggered regulatory scrutiny. Unlike traditional ETFs, these funds would operate as C-corporations and allocate at least 50% of assets to staking, aiming to boost returns. The SEC argues this structure may violate the Investment Company Act and conflict with Rule 6c-11, which outlines how ETFs must be structured.
In a letter dated May 30, SEC staff warned that certain disclosures in the registration filings could be “potentially misleading.” They also noted that the staking-focused funds might not qualify as investment companies under current law. The agency has advised REX and Osprey to postpone the launch until these legal uncertainties are resolved.
Industry Response and Outlook
While the SEC has not taken enforcement action, the delay underscores its cautious approach to crypto-linked financial products—particularly those that challenge conventional structures. The agency has previously halted the rollout of non-traditional ETFs, including those tied to private credit.
Despite the setback, market analysts remain optimistic. Bloomberg’s Eric Balchunas noted that REX and Osprey are pushing the envelope and are well-positioned to be first to market in this emerging category. Meanwhile, the crypto community is closely monitoring developments, hopeful that a favorable resolution could open the door to wider acceptance of staking-based ETFs in the U.S. market.
Earlier, we reported that Ethereum ETF inflows have been rising, driven by growing institutional interest.
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