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Cboe Exchange Proposes Groundbreaking Amendment to Allow Ethereum Staking in ETFs
Cboe Exchange Proposes Groundbreaking Amendment to Allow Ethereum Staking in ETFs
February 13, 2025
Ethereum
Cboe BZX Exchange has filed a regulatory request with the U.S. SEC seeking approval to allow Ethereum staking within ETFs.
The request, submitted on Form 19b-4, marks the first instance of a U.S.-based ETF proposing direct staking. If approved, this would enable investors to earn staking rewards from the fund, an option currently unavailable in Ethereum ETFs.
This news has sparked a rise in Ethereum amid market-wide fluctuations. At the time of this report, ETH is trading at $2,681, reflecting a 2.11% increase over the last 24 hours.
Proposed Amendments to Ethereum ETF Rules
The filing seeks to amend sections of the 21Shares Core Ethereum ETF to incorporate staking mechanisms. The proposal states that the sponsor may stake a portion of the trust’s ETH through staking providers, including the custodian or its affiliates.
However, sponsor affiliates would not be used for staking activities. In return, the trust would receive staking rewards in ETH, which could be classified as income.
Key conditions include restricting the sponsor from pooling the trust’s ETH with assets from other entities, aside from potential pooling at the staking provider level.
Additionally, the sponsor would not advertise staking services, guarantee specific returns, or solicit delegated stakes outside the trust. The sponsor will stake the Trust’s ether solely to maximize revenue generation, but it will not guarantee specific returns.
To mitigate risks, the filing specifies that staking activities will not require the trust’s ETH to leave custodial wallets. Instead, the staking process will utilize a “point-and-click” method, reducing the likelihood of theft.
However, the risk of slashing remains a possibility, and the sponsor has stated that it will not cover or subsidize such risks on behalf of the trust.
SEC Response Timeline
The filing states that the proposed amendments align with the Securities Exchange Act, particularly Section 6(b)(5), which focuses on market integrity and investor protection. The Exchange believes the change would enhance market efficiency and offer investors additional benefits through staking.
The SEC’s decision will follow the standard review process for 19b-4 filings, with a final deadline expected around late October. Historically, the SEC typically addresses such applications near the deadline, though the timeline may vary.
Assuming this is acknowledged by the SEC (I’d probably make that assumption right now but you never know):
The final deadline on this filing will be somewhere around the end of October. Like October 30th-ish.
Will know more in next few weeks.
— James Seyffart (@JSeyff) February 12, 2025
Meanwhile, Cboe BZX has also submitted another 19b-4 request related to ETF structures, focusing on amendments for in-kind creations and redemptions in Bitcoin and Ethereum ETFs.
If approved, this adjustment would allow authorized participants to exchange ETF shares for underlying assets instead of using cash, potentially improving market efficiency and reducing costs.
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