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The U.S. Securities and Exchange Commission (SEC) has raised significant concerns regarding the qualification of REX Financial and Osprey Funds' proposed Solana (SOL) and Ethereum (ETH) staking exchange-traded funds (ETFs). The regulatory body questioned their legal status as investment companies and the unique corporate structure employed, potentially delaying their launch.
SEC Challenges Staking ETF Structure
The SEC formally communicated to ETF Opportunities Trust, the entity responsible for registering funds managed by REX Financial and Osprey Funds, that the new Ethereum and Solana staking ETFs might not meet the definition of a legal investment company under federal law. This challenge came shortly after the funds had cleared initial registration steps, effectively stalling their anticipated launch.
Regulatory Red Flags
The SEC's primary concerns revolve around the funds' unique C-corp business structure, which is uncommon for ETFs and potentially conflicts with the 6C-11 rule, also known as "the ETF rule." This regulation dictates appropriate corporate structures for exchange-traded funds. The SEC stated that disclosures in the registration statement regarding the funds' status as investment companies might be "potentially misleading."
Key Takeaways
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The SEC's objection centers on the C-corp structure and the funds' classification as investment companies.
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The regulatory body views the registration documents as potentially misleading.
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REX Financial intends to address the SEC's concerns before launching the funds.
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Analysts believe a resolution is likely, but the timeline for approval remains uncertain.
Industry Response and Future Outlook
Greg Collett, general counsel at REX Financial, affirmed the firm's commitment to satisfying the SEC's requirements, stating they would not launch the funds until regulatory concerns are resolved. While the immediate launch is paused, analysts like Bloomberg Intelligence's James Seyffart remain optimistic that more straightforward attempts to allow staking in U.S. ETFs will eventually succeed. This incident highlights the SEC's cautious approach to integrating crypto-native features like staking into traditional investment products, particularly given the ongoing legal uncertainties surrounding staking returns.
Sources
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SEC questions legality of new staking-based crypto ETFs, Cryptopolitan.
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SEC backtracks on REX-Osprey staked ETFs, Cointelegraph.
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SEC says REX-Osprey staked SOL and ETH funds may not qualify as ETFs, PANews.
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SEC says REX-Osprey staked SOL and ETH funds may not qualify as ETFs — TradingView News, TradingView.
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