The U.S. Securities and Exchange Commission (SEC) has raised fresh concerns around the classification and legality of exchange-traded funds (ETFs) that use staking, casting doubt on proposals from REX Financial and Osprey Funds.
Both firms recently submitted amendments for ETFs that would incorporate staking mechanisms for Solana (SOL) and Ether (ETH), but the SEC has argued that the funds may not meet the requirements to be classified as traditional ETFs under current U.S. regulations.
While the objections appear procedural on the surface, they have reignited concerns about the broader compatibility of crypto innovation with outdated regulatory frameworks.
Palisade: SEC at Odds with Itself on Staking
Manthan Davé, co-founder of Ripple-backed digital asset custodian Palisade, said the SEC’s objections reflect a deeper discomfort with the evolving structure of digital asset markets.
“The SEC’s latest resistance to staking-enabled ETFs underscores a deeper institutional discomfort with digital asset models that blur traditional definitions,” Davé explained. “At face value, the regulator’s warning to REX-Osprey appears procedural. However, dig deeper and it reflects a regulatory body caught between policy intent and market reality.”
Davé noted that the SEC has previously indicated that staking may not constitute a securities activity—a position welcomed by much of the crypto industry.
Yet the agency’s current hesitance to approve ETFs that rely on staking suggests a contradiction that threatens to discourage innovation.
Calls for Regulatory Coherence Amid Growing Market Demand
According to Davé, asset managers are looking for clarity, not contradiction. “Institutions and asset managers looking to package next-gen digital asset products need more than ambiguity. They need regulatory coherence.”
He warned that without clearer frameworks, the U.S. risks losing its edge as a hub for digital finance innovation.
“We’ve seen this movie before: regulatory opacity pushing innovation offshore, with capital following closely behind,” Davé said.
He urged the SEC to rethink its approach and adapt to how crypto markets actually function.
“Staking isn’t some fringe feature, it’s intrinsic to how modern blockchains operate and secure value,” he said. “The path forward lies in engaging with technical realities and designing fit-for-purpose classifications for crypto-native activities like staking.”
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