The Securities and Exchange Commission (SEC) has once again delayed its decision on a proposed rule change. This modification would allow Grayscale to introduce, among other things, staking services for its spot Ether ETFs. The original proposal was due February 15. The SEC is still considering it, and in April, it delayed a decision deadline. This news comes as Grayscale, in addition to BlackRock, controls four of the five largest Ether ETFs by market capitalization.

Grayscale's Staking Proposal

Grayscale’s proposal would look to change the current rules to include staking services to its spot Ether ETFs. Staking is the process of holding and locking up a specific amount of cryptocurrency to support the operation of a blockchain network. In exchange, those who stake tokens earn rewards in the same token as they receive additional tokens. Grayscale did not file the application itself, the NYSE proposed the rule change on Grayscale’s behalf.

The rumored upcoming rollout of staking for Ether ETFs has created a tremendous buzz in the crypto community. It provides ETF investors an opportunity to generate yield on their investments. This one raises the attractiveness of such financial products through the roof. Lastly, the SEC has explicitly stated that it is evaluating the implications of staking. Main areas of concern they are touching upon include security, regulatory framework, and investor protection.

BlackRock's Engagement with the SEC

BlackRock, another powerhouse in the ETF space, similarly door knocked the SEC on staking. A recent internal SEC memorandum detailing a meeting between BlackRock and the SEC uncovered serious illicit goings-on.

discuss perspectives on treatment of staking, including considerations for facilitating ETPs with staking capabilities - https://www.sec.gov/files/ctf-memo-blackrock-05092025.pdf

This would imply that BlackRock is looking to stake as a way to bring potential staking capabilities into its ETF offerings. BlackRock and Grayscale are issuers of the largest Ether ETFs by market capitalization.

SEC's Deliberations and Industry Impact

Depending on how the SEC rules on Grayscale’s proposal, it could establish precedent for other ETF providers who want to offer staking services. The regulatory body is tasked with ensuring that any new rules or products align with investor protection and market integrity standards. While the delay is no doubt disappointing for some, it signals the complexity of the issues at hand and the SEC’s dedication to robust evaluation.

After the SEC’s denial of the first Ether ETFs, the future of Ether ETFs is uncertain at best. That could foreshadow a big jump in stake-based ETF adoption once approval becomes available. Alternatively, widespread disapproval could lead to a more measured approach to incorporation of these services into investment products.