Amid the increasing scrutiny from the U.S. SEC, the investment heavyweights decided to delete staking elements from their S-1 forms applications. While experts are guessing about the exact motivation of ARK and 21 Shares teams, it is still unclear whether other applicants will follow.
ARK's Ether ETF: ETH staking terms disappear from SEC filing
ARK Invest and 21 Shares removed the description of potential Ether (ETH) staking from their SEC applications for spot ETH ETF launch in the U.S. Fox Business correspondent and frequent ETFs saga commentator Eleanor Terrett noticed this amendment yesterday, May 10, 2024.
🚨NEW: @ARKInvest/21SHARES removes staking from its $ETH spot application. Will be interesting to see if others follow. Wonder if this means @SECGov staff are engaging? @JSeyff @EricBalchunas https://t.co/ANPSy8fjeq
— Eleanor Terrett (@EleanorTerrett) May 10, 2024
Prior to the amendment, the firms were informing the SEC about plans to join ETH staking upon spot Ethereum ETF approval. The applicants were "generally expecting" to stake a portion of ETH under management via trusted staking providers.
Should this work, ETH staking rewards would be treated as income for trust and taxed accordingly under relevant IRS guidance.
Also, the applicants highlighted that ETH staking is associated with risk of potential loss of tokens as a result of the "slashing" procedure in Ethereum's PoS as well as time-limited lack of access to ETH locked in staking contracts.
Staking of crypto coins was frequently targeted by U.S. regulators. As covered by U.Today previously, the SEC came for the Kraken exchange over its staking business back in 2023.
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Despite the issue being settled, the SEC attempted to sue Coinbase over its staking program, which allegedly was associated with unregistered securities operations.
"One less thing for SEC to use in rejection": Bloomberg's Eric Balchunas on intriguing move
Terrett was wondering whether we should expect similar moves from other asset managers waiting for spot ETH ETF approval and what the exact role of SEC's comments in this process is.
Eric Balchunas, senior ETF analyst of Bloomberg, is not that optimistic about the effects of such an unexpected amendment, he stressed in a tweet:
Hmmmm. Interesting. While it may seem like this is them getting their docs in shape based on SEC comments (which would be good news) there hasn’t been any comments. So its prob either a Hail Mary or maybe trying to give SEC one less thing to use in their rejection. Not sure (yet)
Last week, the U.S. SEC yet again delayed the decision on spot ETF approvals for Invesco Galaxy. In April 2024, the regulator also failed to issue the final verdict on the applications by Franklin Templeton and Grayscale.
Spot Bitcoin ETFs were approved by the SEC in January 2024, causing a significant inflow of money into 11 newly-created products.