Ethereum ETFs Potentially Able to Stake in the Future: SEC's Peirce

With Ethereum ETFs expected to debut for trading as soon as next week, Coinage caught up with Securities & Exchange Commissioner Hester Peirce.

After sharing her hopes with Coinage back in January that a court battle wouldn’t be necessary for the Ethereum ETFs to follow Bitcoin’s in winning approval, Commissioner Peirce opened the door for looser restrictions for Ethereum exchange traded products in the future. 

“I think certainly something like staking, or any feature of the product — we saw that on the Bitcoin exchange traded products too, right? There were features of the product that some people would have liked to see included but weren't — those are always open for reconsideration as far as I'm concerned,” she said, noting that her views aren’t necessarily shared by other Commissioners.

Ethereum issuers had originally filed with hopes of including staking before quietly removing that language from applications back in May ahead of winning final approvals. Commissioner Peirce declined to comment on the agency’s discussions with filers during that back-and-forth. SEC Chair Gary Gensler has long taken the position that staking constitutes an investment contract.

“I can't speak to what went on in that process between the staff and the issuers around, whether staking was in or out,” she said.

Commissioner Peirce was equally careful about commenting on the new Solana exchange traded product applications from VanEck and 21Shares. Some in the crypto community had hoped that Solana wouldn’t need to first boast a robust and mature Chicago Mercantile Exchange futures market before the SEC might feel comfortable approving any similar products. VanEck’s Head of Digital Assets Research Matthew Sigel, for example, had recently argued on a podcast that there might be alternative paths to ensuring an unmanipulated market, like surveillance sharing agreements between crypto exchanges and stock exchanges.

“I think people need to look and see whether there have been other types of markets or other types of products where there hasn't been a futures market underlying it, and then they can make the case based on that,” Commissioner Peirce said. “We really have to look at that on a case by case basis. This environment with crypto is so difficult, of course, because there are questions around what my colleagues and I are going to think is a security and not.”

Optimistically, Commissioner Peirce shared her excitement that some of crypto’s gray areas are now being taken up by Congress. The House recently passed FIT21, a bill seeking to provide a legal framework for crypto projects to launch tokens in the U.S. without a fear of attracting SEC enforcement actions.

“I think it's great that Congress has devoted some time to thinking about these very difficult issues, and issues that we could have taken a more positive stand on in the regulatory sphere,” she said.

With added regulatory guidelines from Congress, Commissioner Peirce shared her hope that the drama of exchange traded product approvals would be removed – and similar unnecessary delays avoided.

“We shouldn't strive to have drama around the launch of products like this,” she said. “It should just be, you know, they get to trade and we'll see whether people want to buy them or not and that should be how it plays out.”

According to multiple sources, Ethereum ETFs are still expected to begin trading next week, barring any unforeseen hold ups. Analysts like Fundstrat's Sean Farrell tell Coinage that the market may be underestimating potential inflows in the first few months.

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