Staking status uncertain as SEC pulls brakes on ETFs
Getting your Trinity Audio player ready...
The Securities and Exchange Commission (SEC) has written to the owner of two proposed exchange-traded funds (ETFs), warning that the staking components of their products may make them ineligible for a regulated exchange listing.
The two funds, one intended to be based on Solana and the other on Ethereum, were formally proposed in January by ETF Opportunities Trust, a special-purpose vehicle for launching ETFs. In this instance, it represents REX-Osprey, a joint venture and the ultimate proposer of the funds.
What sets these funds apart is that their construction allows for their digital assets to be 'staked'—in other words, deployed to the network's consensus mechanism—in exchange for further rewards.
The initial filing was made on January 21, with a designated 'go-live' date of May 30. In the intervening months, the Trust went back and forth with the SEC over the specifics of the proposals, which apparently involved the Trust repeatedly tweaking the disclosures made to the SEC. When the May 30 effective date came and went, the Trust had still not resolved all of the SEC's queries, according to a warning letter sent by the SEC last week.
At the heart of the SEC's concerns is whether the funds meet the definition of an 'investment company' under the Investment Company Act in light of the proposed staking functionality. Any fund seeking SEC approval for exchange listing must comply with this definition. Under the Act, an 'investment company' is defined as:
'any issuer… which is or holds itself out as being primarily engaged, or proposes to engage primarily, in the business of investment, reinvesting or trading in securities.'
The SEC apparently feels that the staking proposed by the REX-Opsrey ETFs would remove the funds from that definition.
Though not explicitly linked, the SEC's trepidation can be speculated to stem from recent, sweeping guidance issued by the regulator, which suggests that staking activities definitively do not meet the definition of 'securities' such that they would be regulated by the SEC. Though the industry celebrated this as a manifestation of the SEC's new pro-crypto bent, it may have had the unintended effect of making it more difficult to get approval for staking-enabled ETFs. Staking is becoming the new battleground between the new and old regulatory approaches
If the SEC allows staking ETF-bound digital assets, it would be the latest expansion of crypto's role in traditional financial product models. Certain sectors of the industry have eagerly anticipated such expansion with the arrival of the Trump administration and the appointment of a more crypto-positive SEC Chair in Paul Atkins.
Previous Chair Gary Gensler had indicated that digital assets that offer staking may cross over into the securities definition. However, after industry pressure earlier this year, the SEC issued new guidance in May that, though non-binding, indicated that the regulator would not view staking as a securities product.
Notably, the latest SEC guidance drew criticism from within the SEC itself. Commissioner Caroline Crenshaw accused the guidance of taking a 'fake it till you make it' approach to regulation, pointing out that well-trodden securities rules have already been applied to staking services and, in some cases, have found them to qualify as securities.
'This is yet another example of the SEC's ongoing 'fake it till we make it' approach to crypto – taking action based on anticipation of future changes while ignoring existing law,' wrote the Commissioner.
It's at least arguable that Crenshaw's criticisms are borne out in the hold-up in approving the REX-Osprey ETFs, which presumably would have found an easier path to approval if the SEC considered staking a securities activity.
Watch: Breaking down solutions to blockchain regulation hurdles
title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" referrerpolicy="strict-origin-when-cross-origin" allowfullscreen="">
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Daily Mail
31 minutes ago
- Daily Mail
Trump secretary sets the record straight after being 'body-checked' by Elon Musk
Trump's Treasury Secretary Scott Bessent faced an unusual line of questioning on Wednesday when he testified on Capitol Hill. During a hearing on his department's budget before the Ways and Means Committee, Bessent was grilled about whether he really tackled Elon Musk in the White House last month. 'Mr. Secretary, how are you doing?' Representative Jimmy Gomez (D-Calif.) said innocuously. 'So far, so good,' Bessent quipped back. 'Okay. I was just curious because I know Elon Musk body checked you at the White House. No animosity to Elon Musk, right?' Gomez continued. 'You know that?' Bessent asked about the sparring event. 'That's what I heard,' Gomez responded. Bessent had been partaking in three days of trade negotiations in London and had not yet been questioned about the story. 'So you believe, you believe what you read on Breitbart is what you are telling us, Congressman,' Bessent pressed. 'I didn't know ... If it's too sensitive for you I won't ask that question, but let me move' Gomez flubbed. 'I will take South Carolina over South Africa any day', Bessent replied, referring to his home state versus Musk's nation of birth. Musk was spotted with a black eye as he delivered a sort of farewell address in the Oval Office upon departing from his role as a 'special government employee' heading up Trump's Department of Government Efficiency DOGE). At the time, Musk claimed that the black eye was the result of roughhousing with his young son, X í¿ A-12, who is more commonly know as X. But speculation grew as more was revealed about his tense standoff with Bessent. Former Chief Strategist Steve Bannon told in May that Musk's turbulent time in the White House was marred when he was confronted over wild promises to save the administration 'a trillion dollars'. That's when an irate Musk physically 'shoved' 62-year-old Bessent. 'Scott Bessent called him out and said, "You promised us a trillion dollars (in cuts), and now you're at like $100 billion, and nobody can find anything, what are you doing?"' Bannon revealed. And that's when Elon got physical. It's a sore subject with him. 'It wasn't an argument, it was a physical confrontation. Elon basically shoved him.' Bannon said the physical altercation came as the two billionaires moved from the Oval Office to outside Chief of Staff Susie Wiles' office, and then outside the office of the then National Security Advisor, Mike Waltz.
The Independent
an hour ago
- The Independent
Fake videos and AI chatbots drive disinformation about LA protests
A rioter admitting he was "paid to be here". A National Guard soldier filming himself being bombarded by "balloons full of oil". A young man declaring his intention to "peacefully protest", before throwing a Molotov cocktail. These are some things that are not happening on the streets of Los Angeles this week. But you may think they are if you're getting your news from AI. Fake AI-generated videos, photos, and factoids about the ongoing protests in LA are spreading like wildfire across social media, not least on Elon Musk's anything-goes social network X (formerly Twitter). Made using freely available video and image generation software, these wholly synthetic chunks of outrage usually confirm some pre-existing narrative about the protests — such as the baseless idea that they are being covertly funded and equipped by mysterious outside factions. And while some are technically labelled as parodies, many users miss these disclaimers and assume that the realistic-looking footage is an actual document of events on the ground. "Hey everyone! Bob here on National Guard duty. Stick around, I'm giving you a behind the scenes look at how we prep our crowd control gear for today's gassing," says a simulated soldier in a viral TikTok video debunked by France24. "Hey team!" he soon follows up. "Bob here, this is insane! They're chucking balloons full of oil at us, look!" Another fake video posted on X features a male influencer wearing a too-clean T-shirt in the thick of a riot. "Why are you rioting?" he asks a masked man. "I don't know, I was paid to be here, and I just wanna destroy stuff," the man replies. AI tries to fact-check AI Meanwhile, chatbots such as OpenAI's ChatGPT and X's built-in Grok have been giving false answers to users' questions about events in the City of Angels. Both Grok and ChatGPT wrongly insisted that photos of National Guard members crammed in together sleeping on the floor in LA this week "likely originated" in Afghanistan in 2021, according to CBS News. It also reportedly claimed that a viral photo of bricks piled up on a pallet — which right-wing disinformation merchants had touted as proof of outside funding — was "likely" taken from the LA protests. In fact the photo showed a random street in New Jersey, but even when informed of the truth AI stuck to its guns. AI-generated fakes are merely one new instrument in a long-established orchestra of disinformation. Photos recycled from past protests or events, photos taken out of context, and disguised video game footage — all commonplace among partisan outrage-peddlers since at least 2020 — are being shared widely, including by Republican senator Ted Cruz (who has form in this regard). "Pictures are easily manipulated; that idea has been there," James Cohen, a media professor and expert on internet literacy at CUNY Queens College, told Politico. "But when it comes to videos, we've just been trained as an individual society to believe videos. Up until recently, we haven't really had the opportunity to assume videos could be faked at the scale that it's being faked at this point.' Ammunition for the culture war Most of the videos seen by The Independent were evidently targeted at a conservative audience, designed to reinforce or reference right-wing talking points. At least one TikTok account, however, with more than 300,000 views on its videos as of Wednesday evening, was evidently aimed at progressives interested in stirring messages of solidarity with immigrants. Some are obviously jokes; others, ambiguously jokes. Often there is a tag indicating that they the video is AI-generated. But in most cases this crucial information is easily missed. Unfortunately, the problem is only likely to get worse in future. Republicans' flagship "Big Beautiful Bill" includes a moratorium on all state regulation of AI, which would prevent any state government from intervening for 10 years. While AI-generated videos can be difficult to tell from the real thing, there are ways. They're often suspiciously clean and glossy-looking, as if hailing from the same manicured universe as Kendall Jenner's infamous Pepsi protest advert. The people in them are often strangely beautiful, like the amalgamation of a million magazine photoshoots. The Better Business Bureau also recommends scrutinizing key details such as fingers and coat buttons, which often don't make sense on close inspection. Writing, too, is frequently blurred and illegible: just a jumble of letters or letter-like forms. Background figures may behave strangely or repetitively, or even move in ways that are physically impossible. If in doubt, Google it and see if any trustworthy media organizations or individual journalists have confirmed or debunked what you're seeing. Most of all, be on the lookout for anything that seems to perfectly confirm your pre-existing beliefs. It may just be too good to be true.
Finextra
an hour ago
- Finextra
PayPal to bring stablecoin to Stellar Network
PayPal is hoping to strengthen the utility of its stablecoin by making it available on the high-speed, low-cost Stellar blockchain network. 0 Already available on Ethereum and Solana, PYSUD will come to Stellar pending regulatory approval by the New York State Department of Financial Services. PayPal says that PYUSD on Stellar can be used for fast, affordable real-world payments, remittances, commerce, and micro-financing. The move would give the stablecoin access to Stellar's vast network of on and off ramps, providing additional access through digital wallets, and connected to local payment systems and cash networks. "As we see cross border payments being a key area where digital currencies can provide real world value, working with Stellar will help advance the use of this technology and provide benefits for all users," says May Zabaneh, VP, blockchain, cryptocurrency, and digital currency group, PayPal. PayPal is also touting enhanced liquidity and financing opportunities through Payment Financing or 'PayFi'. SMBs that face delayed receivables or pre-funding requirements would be able to access new sources of real-time working capital, disbursed in PYUSD.
