• SEC puts the brakes on Ethereum staking ETF.
  • Bitwise faces a delay in staking approval.
  • Ethereum rewards raise big questions for ETFs.
  • Staking plan sparks SEC caution and review.
  • Crypto fund innovation meets regulatory pause

The U.S. Securities and Exchange Commission has postponed its ruling on the Bitwise Ethereum Staking ETF proposal. Bitwise seeks to include Ethereum staking in its ETF to generate rewards through the networks proof-of-stake mechanism. However, the SEC has launched official proceedings to assess potential risks and is now accepting public comments on the matter.

Staking Plan for Ethereum Faces Regulatory Pause

Bitwise aims to modify its approved Ethereum ETF to permit staking, which would allow the fund to earn blockchain rewards. The company argues that this change will not impact how the ETF manages or reports its Ethereum holdings. The SEC believes the addition of staking could introduce new risks that may affect fair trading and investor protection.

The Bitwise Ethereum Staking ETF, if approved, would be the first U.S. ETF to integrate Ethereum staking into its structure. While this could provide additional yield, the SEC is evaluating possible exposure to penalties, fraud, or asset lockups. The current review period offers time to consider if such a product aligns with existing financial rules.

The Commission has set a deadline to receive public feedback regarding the Bitwise Ethereum Staking ETF proposal. Public input may influence whether the proposal meets the standards under Section 6(b)(5) of the Securities Exchange Act. This clause requires exchanges to operate in ways that protect market participants and prevent manipulation.

Staking Risks Raise Structural Questions for ETH ETF

The SEC is examining how staking rewards might complicate the ETFs passive structure and its ability to ensure liquidity. Staked Ethereum often becomes illiquid for set periods, which may cause delays during high-volume redemptions or volatile markets. The SEC is evaluating whether such delays are acceptable in an ETF wrapper.

The Bitwise Ethereum Staking ETF could introduce risks tied to validator slashing if the network penalizes incorrect behavior. The SEC aim to understand whether managers bear responsibility in such scenarios. This raises operational questions not encountered in standard spot ETFs.

Bitwise claims the rewards from staking would function like dividends and would enhance the ETFs appeal without changing its core structure. However, the SEC maintains that including active participation in blockchain consensus within a passive fund raises important legal and technical questions. This conflict remains unresolved as the review continues.

Final Decision Now Pushed Past July 6 Deadline

Bitwise submitted its proposal to amend the Bitwise Ethereum ETF through NYSE Arca in March 2025. Following this, the exchange filed an updated amendment in late March, triggering a formal review process by the SEC. The Commission initially designated May 20 as a decision deadline but has opted to extend the review.

This move signals the SECs intent to examine the proposal more thoroughly before allowing the Bitwise Ethereum Staking ETF to proceed. While the proposal remains active, no staking will occur until a final ruling is issued. Depending on the complexity of public feedback and internal analysis, the commission may issue another extension.

The Bitwise Ethereum Staking ETF continues to be a potential turning point in U.S. crypto fund structures. A green light could lead other issuers to follow with staking-based ETFs. The fund remains a regular spot and Ethereum ETF is awaiting final approval.