TLDR
Grayscale met with SEC’s Crypto Task Force on April 21 to advocate for Ethereum ETF staking
U.S. Ethereum ETPs have missed approximately $61 million in staking rewards through February 2025
Grayscale proposed a “point-and-click” staking model with multi-layered liquidity strategy to mitigate risks
SEC has postponed its decision on the proposal until June 1, 2025
Non-U.S. markets in Europe, Canada, and Hong Kong already allow staking in Ethereum ETPs
Grayscale Investments is making a strong case to the U.S. Securities and Exchange Commission to permit staking capabilities for Ethereum exchange-traded products (ETPs), arguing that investors are missing out on millions in potential rewards while international competitors forge ahead.
Representatives from Grayscale met with the SEC’s Crypto Task Force on April 21 in Washington D.C. The meeting focused on amending Form 19b-4 filings for the Grayscale Ethereum Trust ETF (ETHE) and the Grayscale Ethereum Mini Trust ETF (ETH) to allow staking activities.
The asset manager emphasized that U.S. Ethereum ETPs, which collectively manage $8.1 billion in assets, have missed out on approximately $61 million in staking rewards through February 2025. This figure doesn’t include the potential daily compounding of rewards.
Craig Salm, chief legal officer at Grayscale Investments, expressed appreciation for the opportunity to engage with the SEC on this matter. The company presented its case that U.S. Ethereum ETPs should have the same staking capabilities as their international counterparts.
“Through staking, US ETH ETPs will participate in validating transactions on the Ethereum network, contributing to the security and efficiency of the Ethereum blockchain, and in return, earn ETH rewards,” Grayscale stated in its memorandum.
Proposed Staking Model and Safeguards
Grayscale’s proposed approach involves a “point-and-click” staking mechanism designed for ease of use while maintaining strong asset custody. This model would allow asset managers to retain full control over the custody of Ethereum tokens.
To address potential liquidity concerns during unstaking periods, Grayscale introduced a multi-layered strategy. This includes a “Liquidity Sleeve,” short-term financing options with custodians and liquidity providers, and a revolving credit facility to handle redemption risks.
The company argues that this structure aligns with both investor protection principles and the operational realities of proof-of-stake networks. They cited partnerships with Coinbase Custody as part of their operational safeguards to manage potential risks.
Grayscale noted that “currently, spot ETH ETPs do not represent the underlying ETH completely, because they are not currently permitted to engage in staking.” This disconnect between the investment product and the full functionality of the underlying asset represents a gap in the market.
Global Precedents and Regulatory Timeline
The asset manager highlighted that multiple international jurisdictions have already integrated staking into their Ethereum ETPs. Markets in Europe, Canada, and Hong Kong were specifically mentioned as successful examples where staking functionality has been implemented without harming trading efficiency.
These global precedents serve as real-world case studies demonstrating the feasibility and benefits of incorporating staking rewards into traditional investment vehicles. By referencing these examples, Grayscale hopes to persuade the SEC to update its regulatory approach.
The SEC was originally expected to make a decision on Grayscale’s staking proposal by April 17, 2025. However, this timeline has been extended to June 1, 2025, providing additional time for comprehensive evaluation of the potential impacts.
The regulatory delay coincides with leadership changes at the SEC. Paul Atkins, a former commissioner known for his more crypto-friendly stance, has been appointed as the new SEC Chair. Some market observers believe Atkins’ leadership could result in more progressive approaches to digital asset regulation.
Grayscale’s appeal comes at a time when the U.S. crypto investment landscape continues to evolve. The outcome of the SEC’s decision could have far-reaching effects on how institutional and retail investors engage with digital assets through regulated investment products.
The decision, expected by June 1, will determine whether U.S. investors can access the same yield-generating opportunities that are already available to investors in other markets through similar financial products.
