Ether ETF approvals show staking may still be a security in SEC’s eyes

The inclusion of staking in filings for Ether ETFs could have been an indication that regulators want to keep a back door open for future scrutiny.

The Securities and Exchange Commission’s (SEC) process for approving spot Ethereum (ETH) exchange-traded funds (ETF)s) is full of controversies and questions. To begin with, the crypto industry can’t even agree on whether the news constitutes an approval per se — the SEC is yet to clear the products for trading, after all. 

But what we should be paying the most attention to, perhaps, is the compromise on the inclusion of staking in the filings. At best, this is a sign that the product providers have come to a truce with the securities watchdog. More likely, though, it indicates the regulator’s wish to keep a back door open for further scrutiny.

Staking has been a particularly contentious issue for the spot ETH ETFs, with the two camps squabbling over the interpretation of the infamous Howey Test in relation to staking. From the SEC’s point of view, staking meets all four prerequisites to be considered an investment contract. According to the watchdog, staking involves the investment of money into a common enterprise (that is, the blockchain ecosystem) in expectation of profits by relying on the efforts of others — i.e. the blockchain’s validators and developers. So, they argue, staking should be regulated as a security under their jurisdiction.

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