The U.S. Securities and Exchange Commission (SEC) is once again under the spotlight as it raises concerns about two new cryptocurrency ETF proposals. The ETFs, submitted by REX Financial and Osprey Funds, aim to give investors access to staking rewards—an increasingly popular feature in the crypto space. But according to a Bloomberg report published on May 31, 2025, these plans may face regulatory roadblocks.
ETF Proposals Face Legal Hurdles
REX Financial and Osprey Funds are seeking to list exchange-traded funds that would include staking elements. This means investors could potentially earn rewards by pledging tokens to support blockchain networks, a process known as staking. The idea is to bring this decentralized finance (DeFi) benefit into the regulated ETF world.
However, the SEC has raised significant legal concerns. On May 30, the agency reportedly sent a letter to the ETF Opportunities Trust, the entity responsible for overseeing various ETF filings, questioning whether these products actually meet the definition of an “investment company” under U.S. securities law.
The SEC believes the funds “may not meet the legal definition of an investment company,” which is a necessary status for listing ETFs on public stock exchanges. Even more critically, the agency claimed that the filings from REX and Osprey could be “potentially misleading” in how they present the funds’ compliance with regulatory standards.
Response from REX Financial
Greg Collett, general counsel for REX Financial, responded to Bloomberg’s inquiries, saying that the company is fully cooperating with the SEC and will not launch the funds until regulatory concerns are addressed.
“We think we can satisfy the SEC on the investment company question,” Collett said. “And we don’t intend to launch the funds until we do that.”
Despite the current obstacles, Collett remains optimistic. The firm believes that offering staking through ETFs is a viable path forward, one that can be aligned with SEC expectations given the right structure.
James Seyffart, an ETF analyst at Bloomberg Intelligence, commented that this pushback from the SEC might only be temporary. While he acknowledged that the current proposals might not pass regulatory review, he believes it’s only a matter of time before a staking-enabled ETF is approved in the U.S.
“Even if the SEC doesn’t allow this structure to list, we still believe the more straightforward attempts to allow staking in a U.S. ETF will ultimately be successful,” Seyffart said. “It’s a matter of when, not if. But the SEC doesn’t seem to be a fan of the way REX tried to push these listings through.”
SEC’s Mixed Crypto Signals
This new development comes just over a year after the SEC approved spot Bitcoin ETFs in January 2024, an unprecedented move following years of rejection. Then-Chairman Gary Gensler clarified that the agency’s approval applied specifically to Bitcoin and should not be viewed as an endorsement of cryptocurrencies as a whole.
“While we approved the listing and trading of certain spot Bitcoin ETF shares today, we did not approve or endorse Bitcoin,” Gensler said at the time. “Investors should remain cautious about the myriad risks associated with Bitcoin and products whose value is tied to crypto.”
The approval of Bitcoin ETFs was seen as a major turning point in the U.S. crypto regulatory landscape, sparking renewed optimism for additional crypto-related financial products. However, the SEC’s ongoing scrutiny of staking-related ETFs shows that the agency still draws a hard line when it comes to more complex crypto offerings.
Changing Winds Under the Trump Administration
Since President Donald Trump returned to office in January 2025, the SEC has signaled a shift in its stance toward the crypto industry. Under Trump’s administration, several legal actions against crypto firms have been dropped or paused. The most notable example is the recent decision to halt a high-profile lawsuit against Binance and its founder, Changpeng Zhao.
This policy pivot has led many in the industry to hope that the SEC may gradually open up to broader crypto innovation, including ETFs linked to staking, altcoins, and even stablecoins.
Still, this latest ETF rejection, or at least delay, shows that regulators remain cautious about any structure that strays too far from traditional financial models.
What’s at Stake with Staking?
Staking has emerged as a key part of the cryptocurrency ecosystem. It allows token holders to earn rewards for helping secure proof-of-stake (PoS) blockchains like Ethereum, Solana, and Cardano. For everyday investors, staking offers a chance to generate passive income without actively trading.
ETFs that include staking exposure could help bridge the gap between traditional finance and decentralized protocols. They would offer a regulated and accessible way for investors to participate in staking without needing to directly interact with crypto wallets or validators.
However, integrating staking into regulated funds raises a complex web of legal and operational questions. Who manages the validator nodes? How are rewards taxed? Can rewards be treated as income within an ETF structure?
These are the kinds of questions the SEC appears to be focused on and why the path to approval remains bumpy.
The Road Ahead
For now, REX and Osprey’s plans are on hold. But the broader vision of staking-enabled ETFs remains alive. Industry players and analysts agree that, eventually, a compliant model will emerge.
Whether it comes from these firms or another entrant, the pressure is building. Investor demand for diversified crypto products is growing. With Bitcoin ETFs already in place, the market is ready for the next step.
Still, the SEC’s cautious approach suggests that the agency wants to proceed slowly, and only with structures it deems fully compatible with existing law.
Until then, firms like REX Financial must walk a tightrope: innovating just enough to lead, but not so much that regulators pull the plug.
