Main Points:
- Regulatory Clarity from the SEC: On May 29, 2025, the U.S. Securities and Exchange Commission (SEC) issued a staff statement clarifying that routine protocol-level staking of native tokens on public proof-of-stake blockchains does not constitute an offer or sale of securities under the Securities Act.
- Bipartisan CLARITY Act: The Digital Asset Market Clarity (CLARITY) Act, introduced on May 29, 2025, aims to delineate regulatory oversight roles between the Commodity Futures Trading Commission (CFTC) and the SEC, fostering a clear framework for secondary market transactions and imposing strong consumer protection measures.
- Major Asset Managers Mobilize: Industry leaders such as BlackRock, Fidelity, and Bitwise are preparing staking-enabled ETFs that would allow investors to combine crypto exposure with on-chain yield, targeting liquid PoS assets like Ethereum (ETH), Solana (SOL), and Binance Coin (BNB).
- Competitive Landscape and Meetings: BlackRock’s discussions with the SEC on May 9, 2025, reflect institutional efforts to secure regulatory approval for staking features and in-kind redemption mechanisms; similar filings are pending from Fidelity, Bitwise, and WisdomTree.
- Attractive Staking Yields: SOL staking currently provides annual percentage yields (APYs) ranging from approximately 6.97% to 8.79% across major liquid staking protocols, representing a compelling source of yield independent of corporate earnings.
- Potential Market Impact: If approved, staking ETFs could redefine investor expectations, offering a hybrid product that blends capital appreciation from underlying crypto assets with recurring staking rewards, potentially attracting both retail and institutional capital.
Regulatory Landscape: SEC’s Staking Guidance and the CLARITY Act
SEC’s May 29 Statement on Protocol Staking
On May 29, 2025, the SEC’s Division of Corporation Finance released a pivotal Staff Statement titled “Certain Protocol Staking Activities,” which articulated that routine, protocol-level staking of native tokens on public proof-of-stake (PoS) networks, as well as various staking services, generally do not constitute an “offer or sale of securities” subject to SEC enforcement under Sections 2(a)(1) and 3(a)(10) of the Securities Act and the Securities Exchange Act of 1934. The statement clarified four categories of protocol staking activities—self (or solo) staking, self-custodial staking directly with a third party, custodial arrangements, and ancillary services—affirming that these activities fall outside the scope of what the SEC considers an “investment contract” under traditional Howey Test analysis. In practical terms, this guidance means that institutional products incorporating staking rewards—provided investors retain asset ownership and receive necessary risk disclosures—would not be deemed securities issuances simply because they distribute on-chain yield.
Bipartisan Digital Asset Market Clarity Act
Simultaneously, on May 29, 2025, lawmakers introduced the bipartisan Digital Asset Market Clarity (CLARITY) Act, which sought to formalize regulatory roles, segregate customer funds, and cement transparency standards for digital asset intermediaries. This legislation delineates secondary market oversight primarily to the Commodity Futures Trading Commission (CFTC), while reserving the SEC’s jurisdiction for initial coin offerings and other primary capital-raising activities. By codifying principles from SEC v. Ripple—namely that secondary market transactions do not necessarily qualify as securities—the CLARITY Act aims to reduce legal ambiguity that has historically hampered product innovation in the United States. Key provisions include mandatory segregation of customer funds, detailed disclosures of conflicts of interest, and a provisional registration regime for crypto intermediaries, thereby bolstering investor protections while fostering competitive entrepreneurship. Taken together, the SEC’s staking guidance and the CLARITY Act represent a tectonic shift toward regulatory certainty, creating an environment conducive to staking-enabled ETFs.
Institutional Moves: Major Asset Managers Prepare Staking ETFs
BlackRock’s Strategic Discussions
BlackRock has been at the forefront of staking ETF initiatives. On May 9, 2025, BlackRock convened with the SEC’s Crypto Asset and Cyber Unit to explore several regulatory questions, including parameters for integrating staking revenue into an ETF structure and in-kind redemption processes that would allow authorized participants to exchange ETF shares directly for underlying crypto assets. These dialogues underscore BlackRock’s determination to develop a product that marries traditional ETF mechanics—such as in-kind redemptions—with on-chain staking yield, thereby enhancing operational efficiencies and cost structures for investors.
Fidelity and Bitwise Filings
Concurrently, Fidelity filed proposals in late May 2025 seeking SEC approval to implement in-kind redemptions for its spot Bitcoin and Ethereum ETFs, a feature viewed as pivotal for closely mirroring NAV dynamics and reducing tax burdens for long-term investors. Fidelity also signaled intentions to incorporate staking mechanisms into its Ethereum ETF, with a decision deadline slated for June 1, 2025, per the SEC’s announced timeline. Meanwhile, Bitwise submitted updated filings to introduce an Ethereum staking ETF, targeting ETH as its primary asset, and WisdomTree lobbied for analogous modifications to its Bitcoin and Ethereum funds, although final SEC determinations were still pending as of early June 2025.
Anticipated Product Lineups
Industry analysts anticipate that, once approved, staking ETFs will predominantly target three principal PoS networks: Ethereum (ETH), Solana (SOL), and Binance Coin (BNB). Ethereum, which transitioned fully to proof of stake with “The Merge” in September 2022, represents a natural starting point due to its large market capitalization and institutional adoption; BlackRock has reportedly filed under the ticker “BETH,” while Fidelity’s version might trade as “FEETH”. In parallel, Solana—an ecosystem known for its high throughput and lower transaction fees—offers compelling yield opportunities; Bitwise’s prospective “SOLSTK” ETF would likely capture liquid staking derivatives such as JitoSOL and Marinade’s mSOL to distribute rewards. For BNB, asset managers like VanEck are exploring a “BNBSTK” product, although regulatory filings for a spot BNB ETF remain in an earlier phase compared to ETH and SOL initiatives.
Technical Aspects of Staking ETFs
How Staking Rewards Are Integrated
Staking ETFs function by holding the underlying PoS assets in a custodial arrangement, delegating those tokens to qualified network validators, and passing through staking rewards to fund shareholders after deducting management fees. For example, an ETH staking ETF would accumulate ETH in a cold wallet or via institutional custody solutions (e.g., Coinbase Custody or Fidelity Digital Assets), delegate those ETH to vetted validators, and periodically collect staking rewards (paid in ETH) that are reinvested into the fund or distributed as additional shares. In contrast to traditional crypto funds that may internalize staking yield or distribute it separately, a staking ETF promises transparency akin to conventional equity ETFs, with daily NAV calculations reflecting both price movements and accrued staking income.
In-Kind Redemptions: A Critical Component
In-kind redemptions represent a cornerstone feature for minimizing tax liabilities and narrowing tracking error. Unlike cash-redemption ETFs where authorized participants exchange shares for fiat, in-kind ETFs deliver baskets of underlying crypto (e.g., delivering 10 ETH for 1,000 ETF shares). By facilitating direct exchange, in-kind mechanisms help large investors avoid capital gains triggered by selling underlying assets, preserving yield and reducing market impact. SEC delays in approving in-kind redemptions—seen in December 2024 and early 2025—have been a bottleneck; however, the SEC’s recent acknowledgments suggest a growing openness to align crypto ETFs with standard U.S. ETF structures.
Custody and Validator Selection
Custody arrangements for staking ETFs involve robust security protocols, including multi-party computation (MPC) wallets and hardware security modules (HSMs). Fund sponsors typically partner with institutional custodians—Coinbase Custody, Fidelity Digital Assets, or Anchorage—to safeguard assets and manage on-chain delegation. Validator selection is equally critical; ETFs often delegate to multiple high-performance validators to mitigate slashing risk and avoid centralization. For example, Marinade Finance and Jito Network lead the Solana liquid staking landscape, each offering distinct tokenized yields (mSOL, JitoSOL) that can be reintegrated into DeFi.
Market Trends and Investor Implications
Yield Comparisons: Staking vs. Traditional Fixed Income
Current macroeconomic conditions—characterized by elevated interest rates—have dampened bond yields, making traditional fixed income less attractive for yield-seeking investors. In contrast, staking yields on major networks provide APYs that often exceed 5% to 8%. For instance, DefiLlama data indicates that JitoSOL liquid staking yields hover around 7.48%, while Drift’s drift-staked SOL (dSOL) protocol offers approximately 8.79% APY as of May 29, 2025. By comparison, high-quality U.S. Treasury yields (e.g., 10-year TIPS) currently offer roughly 3% to 4%. Consequently, staking ETFs could attract yield-starved investors seeking diversification beyond equities and bonds.
Investor Appetite and Retail Adoption
Retail adoption of staking ETFs is expected to mirror the success seen in pure-play crypto ETFs. Since their approvals in early 2024, spot Bitcoin ETFs have cumulatively attracted over $40 billion in inflows, demonstrating robust demand for regulated, exchange-traded crypto exposure. Similarly, Ethereum spot ETFs launched in May 2024 have amassed approximately $5.8 billion in assets under management (AUM), per JPMorgan projections. Given this precedent, staking ETFs might capture a significant share of newly allocated capital, particularly from institutional investors wary of unregulated DeFi platforms.
Diversification and Portfolio Efficiency
From a portfolio construction perspective, adding a staking ETF introduces uncorrelated yield streams that may reduce total portfolio volatility. Crypto asset prices historically exhibit higher volatility than equities or commodities; however, staking rewards provide a stable income component that can cushion drawdowns during market corrections. This hybrid model—where base crypto exposure captures upside during bull markets and staking yields offer a safety net—aligns well with modern portfolio theories emphasizing yield enhancement and risk mitigation.
Competitive Outlook: Which Products Will Lead?
BlackRock vs. Fidelity vs. Bitwise
BlackRock: Leveraging its iShares platform, BlackRock is widely expected to file for multiple staking ETFs concurrently, including ETH and SOL. The firm’s advantage lies in its deep liquidity partnerships, experience with in-kind mechanics in its IBIT (iShares Bitcoin Trust), and its recent dialogues with the SEC that may expedite approval processes. BlackRock’s prominence and track record have already translated to over $10 billion in ETH spot ETF AUM since mid-2024.
Fidelity: With a robust digital assets division, Fidelity is advancing its staking ETF plans through FBTC (Fidelity Wise Origin Bitcoin Fund) and an upcoming Ethereum staking product. Fidelity’s in-kind redemption proposal—though delayed—signals it will likely proceed swiftly once the SEC greenlights staking features for ETH ETFs. Fidelity’s historical relationships with custodians and validator networks, coupled with its established brand trust among retail investors, position it as a formidable competitor.
Bitwise: As a smaller asset manager, Bitwise has generated strong returns with its initial Bitcoin ETF. Its strategic focus on niche niches, including an inaugural Ethereum staking ETF and a potential Solana staking vehicle, could yield early-mover advantages. Bitwise’s partnership with Jito Network for SOL staking and its relatively lower expense ratios may attract cost-conscious investors seeking targeted exposure.
Secondary Players: WisdomTree, VanEck, and Others
WisdomTree: The firm has amended its Bitcoin and Ethereum ETF filings to include staking provisions, though its product rollouts will likely trail major players by several quarters. WisdomTree’s strength lies in thematic basket strategies that combine multiple PoS assets into a single product, potentially offering diversified yield pools from ETH, SOL, and BNB.
VanEck: VanEck recently filed for a spot BNB ETF and may expand to include staking features for its BNB product if market demand is sufficient. However, approval timelines for a BNB staking ETF are expected to be longer due to BNB’s classification debates and the asset’s perceived intermediary role within Binance’s broader ecosystem.
Other Niche Issuers: Smaller players like 21Shares and Grayscale have also signaled intentions to introduce staking mechanisms, although Grayscale currently focuses on its Ethereum Trust (ETHE) conversion strategy rather than a direct ETF launch. The success or failure of these niche issuers will depend heavily on marketing budgets and distribution channels, as well as their ability to secure validator partnerships.
Potential Risks and Considerations
Regulatory and Approval Uncertainty
While the SEC’s May 29 guidance provides a favorable environment, final product approvals are not guaranteed. The SEC could impose additional conditions—such as limiting the proportion of staking yield allocated to shareholders, mandating specific validator whitelists, or requiring frequent audits of validator performance. Additionally, the CFTC might assert dual jurisdiction over certain staking derivatives if the CLARITY Act provisions shift secondary oversight responsibilities, potentially delaying launches.
Technical Risks: Slashing and Network Outages
Staking involves delegating tokens to validators who participate in consensus. If a validator behaves maliciously or experiences technical issues—such as downtime or double-signing—the network’s slashing mechanism could penalize the staked tokens by reducing rewards or confiscating a percentage of staked assets. Although major liquid staking protocols mitigate this risk by diversifying delegations across multiple validators, systemic failures (e.g., a critical Solana outage) could undermine yield expectations and erode investor confidence.
Market Volatility: Crypto Price Fluctuations
Even if staking yields remain stable, the net asset value of a staking ETF will fluctuate based on underlying crypto price movements. During bear markets, sustained price declines—such as a 50% drop in ETH or SOL—could outpace yield accrual, resulting in negative total returns for ETF shareholders. Investors should recognize that staking yields do not eliminate downside price risk, and yield rates themselves may compress over time as network participation increases and rewards adjust.
Counterparty and Custody Risks
Although institutional custodians implement rigorous security measures, centralized custody always entails counterparty risk. Custodians could face hacks, internal malfeasance, or technical failures that compromise asset safety. Moreover, if a custodian becomes insolvent, staking rewards tied to that custodian’s validator nodes might be inaccessible, delaying distributions and complicating redemption processes.
Outlook and Future Developments
Timeline for Approval
Analysts anticipate initial SEC decisions on staking ETFs to occur between late June and early Q3 2025. Ethereum-centric applications (e.g., BlackRock’s BETH, Fidelity’s FEETH) are front-runners, given the network’s larger institutional traction and clearer regulatory framing post-Merge. Solana and Binance Coin products may require additional time—potentially extending into late 2025—due to less established infrastructure for custody and validation at scale.
Emergence of Multi-Asset Staking Products
Beyond single-asset staking ETFs, fund sponsors are exploring multi-asset versions that allocate across ETH, SOL, and BNB, blending varying yield profiles to optimize risk-adjusted returns. Such products could rebalance dynamically based on on-chain data (e.g., validator performance, network congestion fees) to enhance total yield. Multi-asset staking ETFs could appeal to institutional allocators seeking a one-stop solution for crypto yield exposure without needing to manage individual wallets or validator relationships.
Impact on DeFi Ecosystem
The introduction of staking ETFs might spur collateral inflows, alleviating some liquidity in decentralized liquid staking platforms (e.g., Lido, Marinade). While mainstream ETFs will likely hold native ETH or SOL for on-chain delegation rather than liquid staking derivatives, their presence could validate staking’s long-term viability and attract additional DeFi participants. Liquid staking protocols might respond by offering enhanced yield curves or integrating directly with ETF issuers to provide tokenized staked assets.
Geopolitical and Macroeconomic Considerations
Global macro trends—such as tightening monetary policy, inflationary pressures, and potential crypto regulatory shifts in Europe and Asia—will influence staking ETF adoption. For instance, if the Federal Reserve signals rate cuts in late 2025, yield spreads between traditional fixed income and staking yield could narrow, reducing staking ETFs’ relative attractiveness. Conversely, European regulatory pathways (e.g., MiCA implementation) might offer faster approval timelines for similar products, prompting U.S. sponsors to consider cross-listings.
Conclusion
Staking exchange-traded funds stand poised to transform the landscape of crypto investing by merging the transparency and convenience of traditional ETFs with the compelling yields of on-chain staking. The SEC’s May 29, 2025 guidance, coupled with the bipartisan CLARITY Act, has established an unprecedented window of regulatory clarity that unlocks new product innovation. Major asset managers—BlackRock, Fidelity, Bitwise, and others—are actively vying to introduce staking ETFs focused on Ethereum, Solana, and Binance Coin, with yield streams ranging from 6.97% to 8.79% on select assets.
As regulators deliberate on in-kind redemption mechanisms and product specifics, investors and institutions should monitor developments closely. The approval of staking ETFs could attract tens of billions in new capital, encouraging broader adoption of decentralized finance practices within regulated frameworks. Meanwhile, risks such as slashing, network outages, and price volatility underscore the need for robust custody solutions, diversified validator strategies, and disciplined portfolio allocation.
In sum, staking ETFs represent a watershed moment: they have the potential to democratize on-chain yield, foster deeper institutional engagement, and solidify crypto’s role in mainstream investment portfolios. As we move through mid-2025, stakeholders across the ecosystem must prepare for a novel era where staking rewards and ETF efficiency converge to redefine investor expectations and market dynamics.
