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Ark Invest and 21Shares Amend Spot Ethereum ETF Proposal, Exclude Staking

Revised Ethereum ETF proposal: staking plans withdrawn

Ark Invest and 21Shares revise their Ethereum ETF proposal, removing plans to stake Ethereum in anticipation of an upcoming SEC decision.

Key takeaways:

  • Ark Invest and 21Shares revise their spot Ethereum ETF proposal, removing ETH staking plans.
  • The SEC's impending decision on various Ethereum ETF applications could influence the entire sector.

Ark Invest and 21Shares have revised their proposal for a spot Ethereum ETF, notably omitting previous plans to include ETH staking, according to a new filing on May 10. Initially, in their February 7th proposal, 21Shares had outlined intentions to stake a portion of the ETF’s assets through third-party services, anticipating ETH rewards which would be accounted as income for the fund.

The initial filing also recognized the risks associated with staking, such as potential losses from slashing penalties and funds being locked during the bonding and unbonding periods. However, this section has been removed in the latest submission. The updated document retains general warnings about possible losses to other validators and how staking activities might influence ETH prices.

Erich Balchunas, a senior ETF analyst at Bloomberg, speculated on the reason for this amendment, suggesting it might be an effort to streamline the application in response to SEC feedback. He indicated that this adjustment might be a strategic move, either as a last-ditch effort— a "Hail Mary"—or to reduce the grounds on which the SEC could base a potential rejection. Nonetheless, he noted that the SEC has not publicly commented on the application.

Impending SEC decisions

The Securities and Exchange Commission (SEC) is on the cusp of making decisions on various spot Ethereum ETF applications, with deadlines fast approaching. The SEC’s decision on VanEck’s application is due by May 23, followed by the Ark and 21Shares proposal on May 24. It is anticipated that the SEC will issue decisions on all competing applications concurrently.

Market sentiment about the approval of these ETFs remains skeptical. Betting markets on Polymarket currently reflect only a 10% probability of approval by the end of May, a slight increase from 7% the previous week.

Other firms like Franklin Templeton and Fidelity have also mentioned the possibility of including ETH staking in their proposals submitted in February, while Grayscale mentioned it in a March filing, highlighting a trend towards exploring staking rewards in ETF structures.