Grayscale calls on the SEC to allow ETH ETF staking, arguing that this will provide investment benefits, enhance network security, and attract capital inflows into crypto.
Grayscale Investments met with the SEC's Crypto Task Force on April 21 in Washington D.C. to advocate for the expansion of staking regulations for Ethereum ETF funds. The company submitted a request to amend the Form 19b-4 filing related to the Grayscale Ethereum Trust ETF (ETHE) and Grayscale Ethereum Mini Trust ETF (ETH) to allow these two funds to participate in staking.
Economic benefits and ecosystem from staking
In the summary memo of the meeting, Grayscale emphasizes that Ethereum ETFs in the U.S. – currently managing total assets worth $8.1 billion – have missed out on approximately $61 million in staking rewards since their launch until February 2025, "not accounting for daily compounding effects." Instead, these rewards have gone to Ethereum ETFs outside the U.S. and other staking entities.
Grayscale argues that allowing staking not only provides additional returns for investors but also helps strengthen the security of the Ethereum network: "Through staking, U.S. ETH ETFs will participate in validating transactions on the Ethereum network, contributing to the security and efficiency of the Ethereum blockchain, and in return will receive ETH rewards."
To address potential liquidity issues, the company has proposed a layered strategy, including the implementation of a "Liquidity Sleeve," short-term financing options with custodians and liquidity providers, along with a revolving credit mechanism to mitigate withdrawal risks during the unstaking phase.
Grayscale also points out that markets outside the U.S., particularly in Europe and Canada, have successfully integrated staking activities into ETFs without affecting trading efficiency. The company asserts: "By leveraging principles from traditional finance and the experience of managing ETFs facing similar liquidity challenges, along with a vast network of partners in the digital asset ecosystem, Grayscale can effectively and responsibly stake ETH."
While acknowledging the potential risks related to taxes and the possibility of "slashing" (penalties for validation errors), Grayscale still expresses confidence that operational safeguards and custodial mechanisms – particularly through Coinbase Custody – will manage these risks.
