ARK 21Shares Update ETH ETF Proposal: No More Staking

• The SEC has consistently delayed comments or decisions regarding ETH ETFs.
• Ark Invest and 21Shares take a bold gamble by removing staking from their proposal.
• With days left until the deadline, 21Shares hopes to prompt a response from the SEC.

Major asset managers in the US are locked in a heated race to launch a spot ETH ETF , but their pursuit faces a major roadblock– an SEC that isn’t a fan of crypto. While the regulator approved the first spot Bitcoin ETF this year , after much delay, it has maintained radio silence on the prospects of an ETH ETF, leaving issuers in the lurch. 

Faced with mounting pressure, issuers are scrambling to finetune their proposals, hoping the SEC will break its silence and provide some much-needed guidance. With the countdown to the deadline only weeks away, Ark Invest and 21Shares are rolling the dice with a bold move in their amended proposal.

21Shares’ Bold Gamble

Cathie Wood’s Ark Invest and 21Shares have cut staking out of its latest spot Ether ETF proposal, hoping to provoke a response from the SEC. 

In an updated filing submitted on Friday , May 10, the clause stating 21Shares’ plans to stake a portion of the fund’s assets through third-party providers was removed. Previously, the filing said, “Sponsor may, from time to time, stake a portion of the Trust’s assets through one or more trusted Staking Providers.”

With staking becoming an integral part of the Ethereum network, 21Shares anticipated receiving ETH as a reward for staking. The issuer sought to classify the resulting earnings as income generated by the fund. 

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However, 21Shares has to shelve these plans for now. Still, their proposal addresses potential losses due to slashing penalties, temporary inaccessibility of funds during bonding and unbonding, and potential impacts on the price of Ether.

According to Bloomberg ETF expert Eric Balchunas , 21Shares is getting its proposal “in shape” for the SEC’s comments. He adds that the issuer’s move could be a bold gamble or an attempt  “to give the SEC one less thing to use in their rejection.” 

Still, with the countdown nearing the deadline for a decision on 21Shares’ proposal, hopes of a potential approval appear slim.

Will the SEC Come Around to Approve the ETH ETF? 

Ark Invest and 21Shares threw their hats in the ring for a spot ETH ETF last September . With their deadline looming, the SEC’s deafening silence hints at another potential rejection.

The SEC has been continuously stalling on comments or decisions regarding ETH ETFs, recently extending deadlines for proposals from major players like Grayscale, Franklin Templeton, VanEck, BlackRock, and others.

Their radio silence could be attributed to the current SEC administration using up the entire 240-day window to provide a final decision, as they did with the Bitcoin ETF. However, for most issuers, that window closes in May.

Adding to the uncertainty, the ongoing investigation into the Ethereum Foundation raises concerns. Major figures like MicroStrategy’s founder Michael Saylor speculate that regulators are plotting to classify the post-merge proof-of-stake Ethereum as a security , leading to a blanket rejection of all proposals.

However, everything remains speculative until the SEC breaks its silence and offers comments. Market participants will continue to be on edge, and the market will likely move sideways until there’s clarity—whether it’s an approval or a rejection.

On the Flipside

• The SEC isn’t a fan of staking, which is evident from its string of enforcement actions against staking products .
• Many ETH developers, including founder Vitalik Buterin, lack confidence in Ethereum’s staking .
• The SEC recently endorsed the CFTC’s classification of ETH as a commodity by approving ETH futures ETFs.

Why This Matters

The SEC’s silence is causing considerable unease among issuers, causing them to scramble for hints or indications from the agency. Until the SEC provides comments, issuers will remain in flux, hastily adjusting their proposals to strike the right balance for potential approval of an ETH ETF.

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