REX Shares and Osprey Funds have filed plans with the U.S. Securities and Exchange Commission (SEC) to launch two new exchange-traded funds (ETFs) focused on Ethereum and Solana. These ETFs stand apart from previous products by including staking features and structuring the funds as C-corporations instead of regulated investment companies.
This method could potentially speed up the approval process, but the SEC has flagged legal concerns about whether the funds fit within existing rules for investment companies.
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C-Corporation Structure as a Regulatory Shortcut
According to the filing, each fund will invest at least 80% of its net assets in Ethereum or Solana. In addition, a minimum of 50% of the assets in each ETF will be staked to generate yield. Staking involves locking up cryptocurrency holdings to help secure the blockchain network in exchange for periodic token rewards.
The firms chose to structure these ETFs as regular C-corporations under U.S. tax law rather than following the more typical 19b-4 exchange rule-change route. By doing this, REX-Osprey intends to categorize staking rewards as dividend income for shareholders. This is an unconventional method compared to prior crypto ETFs, and it might allow faster market entry.
Anchorage Digital will serve as the qualified custodian for the funds. Anchorage CEO Nathan McCauley said:
“Staking is the next chapter in the crypto ETF story. We are breaking new ground with Rex Shares by providing federally regulated custody and staking support for the first-ever crypto staking ETFs.”
SEC Raises Questions Around Legal Classification
On the same day that the registration statements became effective, the SEC sent a letter to the fund sponsors, highlighting concerns that could delay or even block the ETFs. The main issue raised by the SEC was whether the proposed structure meets the legal definition of an “investment company” under the Investment Company Act.
Brent J. Fields, an associate director at the SEC, stated that the Commission’s staff continues to have unresolved questions regarding the classification. The agency also asked REX-Osprey to delay the effectiveness of their filing. If the questions are not answered, enforcement or forced refiling could follow.
The SEC made an email sent on May 29 public, part of a back-and-forth communication with the issuers. The agency wants investors to have full access to relevant information before any potential launch.
Spot Ethereum and Solana Status Impacts Approval Path
While spot Ethereum ETFs have been trading since July 2024, Solana still lacks an approved spot ETF. This creates an added barrier for the REX-Osprey Solana product. In March, the Chicago Mercantile Exchange began listing SOL futures, which some industry watchers view as an early step toward spot product acceptance. However, without prior approval of a spot Solana ETF, the proposed staking version faces an uncertain path.
Eric Balchunas from Bloomberg said that the filing could be a quicker way to bring staking funds to market. But another Bloomberg analyst, James Seyffart, pointed out:
“There might be more efficient vehicles/structures for this type of exposure that come to market in the future.”
The proposed ETH and SOL funds list annual operating costs of 1.28% and 1.4%, respectively. These are in line with existing crypto ETF ranges, though slightly higher due to the complexity of managing staking operations.
Read also: Canada Approves Solana Staking ETFs – SEC Delays Ethereum
Staking ETFs Could Alter Crypto Investment Access
If approved, these staking ETFs would represent a major shift in how U.S. investors can gain exposure to yield-generating crypto assets. Until now, the SEC has resisted staking mechanisms in ETFs due to concerns around classification, income recognition, and investor protection.
Staking has become a large part of revenue for institutional custodians. BitGo, a competitor to Anchorage, previously disclosed that nearly half of its revenue comes from staking services. By allowing these types of ETFs, the SEC would acknowledge a growing segment of the crypto market.
The proposed structure not only allows token exposure but also includes the additional value generated through staking without requiring users to hold wallets or manage private keys. This could appeal to investors looking for crypto yield without the hassle of self-custody or technical barriers.
Read also: Why Not Staking Your Solana Might Be Costing You Money
Issuers Expect Regulatory Debate to Continue
REX Financial’s general counsel, Greg Collett, acknowledged the SEC’s concerns but remained optimistic. He told Bloomberg:
“We think we can satisfy the SEC on the investment company question, and we don’t intend to launch the funds until we do that.”
Although some in the industry view the C-corporation model as clever legal work, regulators appear cautious. The concern lies in whether staking returns, when distributed to shareholders, fundamentally change the nature of the fund in legal terms.
The SEC has a track record of slow approvals in the crypto space, only granting spot Bitcoin ETF approvals in early 2024. Even then, the process took years. The recent REX-Osprey proposal may test how far issuers can stretch traditional ETF rules to fit new blockchain-based returns.
Read also: ETF Delays Are Piling Up – But Investors Aren’t Worried Yet
Final Words
The proposal follows increased lobbying after Donald Trump’s return to office, with stakeholders pressing federal agencies for clearer rules on staking, especially regarding funds and taxes. For example, the Jito Foundation met with the SEC’s crypto task force, highlighting broader industry efforts for legal clarity.
Currently, no staking ETFs exist in the U.S. market, although they are appearing in other countries. The REX-Osprey proposal could be the first, but it remains uncertain, awaiting SEC decisions and additional disclosures.
Read also: Spot Crypto ETFs: Who’s Next in Line for Approval?
