SEC Acknowledges Staking Requests from Ethereum ETF Issuers

Fidelity and Franklin Templeton's applications mark a potential shift in Ethereum ETF regulations

Ethereum ETF: A Market in Need of a Boost

The current sentiment in the crypto market isn't exactly bullish. Even though U.S. inflation data came in better than expected yesterday, Bitcoin, Ethereum, and other major cryptocurrencies barely reacted. Lower inflation could pave the way for Federal Reserve interest rate cuts—something the crypto market desperately needs.

But there’s a silver lining: the U.S. Securities and Exchange Commission (SEC) has acknowledged the staking applications submitted by Ethereum ETF issuers Fidelity and Franklin Templeton. This move could mark a significant development in the future of Ethereum ETFs.

Could Ethereum ETF Issuers Soon Be Allowed to Stake?

Anything related to crypto ETFs seems to take forever. The SEC has been notoriously slow in approving them. It took years for spot Bitcoin ETFs to get the green light, while Ethereum ETFs were surprisingly approved much faster. Now, applications for ETFs based on XRP, Solana ($SOL), Dogecoin ($DOGE), and Litecoin ($LTC) are in the pipeline—likely facing another long waiting period.

Although the SEC is under new leadership, making crypto ETF approvals easier in the long run, we are still in a transition phase where the boundaries of what is permissible remain unclear. A key condition for approving Ethereum ETFs was the exclusion of staking. But that might soon change.

Fidelity and Franklin Templeton have officially requested permission from the SEC to stake the Ethereum ($ETH) they hold as part of their ETF reserves. If staking yields were distributed to investors, Ethereum ETFs would become significantly more attractive, potentially drawing in more institutional capital.

No Final Decision Yet

While the SEC has acknowledged the applications, they have not yet been approved. This step is promising, but it doesn’t guarantee that the SEC won’t suggest modifications or ultimately reject the proposals. Under the new Trump administration, regulatory considerations remain complex.

One major issue is whether staking would push Ethereum ETFs into the realm of securities regulation. Additionally, ETF issuers accumulating large amounts of staked ETH over time could lead to a concentration of staking power—raising concerns about Ethereum’s decentralization.

Market capitalization and assets under management of major Ethereum ETF issuers – Source: Blockworks

A final decision is unlikely in the coming weeks. Even after this acknowledgment, it could still take months before the SEC reaches a verdict.

Potential Impact on Ethereum

Allowing staking in Ethereum ETFs would be a double-edged sword for Ethereum itself. On one hand, it would make these ETFs much more appealing to institutional investors, as they would generate additional returns independent of price movements.

On the other hand, the growing concentration of staking power among ETF issuers could reignite concerns about Ethereum’s decentralization. Some investors who prioritize decentralization might turn away from Ethereum as a result.

From a price perspective, however, approval of staking requests would likely be bullish. Even if some retail investors decide to exit, the influx of institutional money could drive Ethereum’s price higher—potentially fulfilling optimistic price forecasts.

Key Takeaways:

• Fidelity and Franklin Templeton have applied for staking permissions in their Ethereum ETFs.
• The SEC has acknowledged these applications, but approval is still pending.
• If staking is allowed, Ethereum ETFs could become significantly more attractive to investors.
• However, ETF issuers could end up controlling a substantial portion of Ethereum’s staking power.