ARK Invest removes staking feature from its Ethereum spot ETF filing

Staking has come under increasing scrutiny from the SEC in recent months.

ARK Invest and 21Shares have amended their S-1 form for the proposed spot Ethereum exchange-traded fund (ETF) by removing the staking component, as shown in a filing dated May 10.

In February, the two firms updated their filing with the option to stake Ethereum, in addition to cash-only redemption. Staking is considered a good way for fund managers to profit from the large amounts of crypto that ETFs can hold beyond just earning management fees.

However, at the time, experts suggested that ARK Invest’s staking proposal for Ethereum was more of a “probe” to test the Securities and Exchange Commission’s (SEC) response rather than a confident expectation that it would be approved by the securities agency.

The SEC has indicated that staking could classify the asset as a security, which is undesirable for spot Ethereum ETFs. Last year, the SEC fined Kraken and demanded a halt to its staking services.

Legendary trader Peter Brandt said in a recent post on X that the SEC is going to crack down on staking.

If the crypto community is upset over the @SECGov treatment of $XRP, $ETH et al as securities,

Wait until the @USOCC @SECGov @USTreasury do a full assault attack over staking

It’s going to be a bloodbath

— Peter Brandt (@PeterLBrandt) May 9, 2024

The latest amendment to ARK Invest’s application fuels speculation about ongoing discussions between the SEC and spot Ethereum ETF applicants, suggesting that the applications are being modified to align with SEC preferences.

The reasons for ARK Invest’s recent modification remain undisclosed, as no official statements have been made by the involved parties.

Crypto analysts are marking May as a critical month for the future of these spot Ethereum ETFs. The SEC is expected to make a decision on VanEck’s filing on May 23. The general consensus among analysts is that the filing will likely be rejected.

Earlier this week, Grayscale, the world’s leading digital asset manager, withdrew its bid for Ethereum futures ETF, potentially to avoid sole responsibility for legal challenges in case of a denial from the SEC.

[Updated with ARK Invest’s amendment in February, Kraken’s case, and Peter Brandt’s statement]

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