REX Shares and Osprey propose a staking ETF for Ethereum and Solana, awaiting SEC approval.

REX Shares and Osprey Funds are planning to launch staking ETF funds – investment products that allow investors to receive rewards from staking digital assets while following the actual value of Ethereum (ETH) and Solana (SOL). The information was disclosed in a filing submitted to the Securities and Exchange Commission (SEC) on Friday.

According to the SEC Form N-1A registration template, each fund will invest "at least 80% of its net assets into the corresponding reference asset," which is ETH or SOL. In addition, each fund will also stake "at least 50% of the assets held" to generate staking rewards for investors. However, it is still unclear what custody or staking service REX-Osprey will use.

ETFs are increasingly becoming a popular channel for investors to access the cryptocurrency market, especially since the SEC approved a series of spot Bitcoin ETFs at the beginning of 2024. Bitcoin ETFs, led by BlackRock's IBIT, quickly became one of the best-performing investment products in the market.

Although the SEC has approved spot Ethereum funds and some other mixed products, the agency remains cautious about ETFs that allow staking of the underlying assets – due to unclear legal identification and tax regulation issues.

However, on May 30, the SEC announced that some staking activities on the blockchain are not related to the offering of securities, an indication that they may accept staking ETFs.

However, after President Donald Trump was elected, many organizations in the industry intensified their lobbying efforts and met with regulatory agencies to clarify the legal framework for staking activities, including the approval of staking funds and tax obligations on staking rewards. Among them, the Jito Foundation is one of the first organizations to meet directly with the SEC's crypto task force to discuss this issue.

The proof-of-stake system requires users to lock their assets to protect the network from attack behaviors, in return they will receive staking rewards – an incentive to maintain the security and operation of the blockchain.

Notably, if approved, REX-Osprey's funds will be classified as "regular C corporations" (C Corporation) instead of "regulated investment companies" (regulated investment company) like the current Bitcoin and Ethereum funds. This means that staking rewards will be treated as taxable dividends, rather than under the specific tax exemption mechanism of traditional ETFs.

"Assuming these products are launched in the near future, this is essentially a very clever legal and regulatory approach to bringing products to market," said Bloomberg Intelligence analyst James Seyffart on X. "However, there is still a possibility that more efficient product structures will emerge in the near future - possibly as soon as this year."

The SEC has not yet approved any spot Solana funds, including non-staking ones, despite many pending applications. The CME listing of SOL futures in March is seen by some experts as a stepping stone for a spot ETF. Bloomberg analyst Eric Balchunas also noted that REX-Osprey's strategy could be a "faster route" to market access.

According to the records, the annual operating fee of the ETH fund is 1.28%, while the SOL fund is 1.4%.