The United States Securities and Exchange Commission (SEC) responded to the effective registration amendment for Solana (SOL) and Ether (ETH) staked exchange-traded funds (ETFs) from ETF provider REX Financial and asset management firm Osprey Funds, raising concern that both investment vehicles do not qualify as ETFs due to their unique structures.

According to a recent report from Bloomberg, the regulators say the c-corp business structure used in the funds, which is incredibly rare for ETFs, conflicts with the 6C-11 rule, colloquially known as “the ETF rule.” This regulation legally designates the types of corporate structures appropriate for exchange-traded funds. The SEC wrote in a May 30 letter:

“As we have communicated to you on several occasions, Commission staff continues to have unresolved questions about whether the Funds, if structured and operated as proposed, would be able to meet the definition of ‘investment company’ under the Investment Company Act.”  

“Disclosures in the registration statement regarding the Funds’ status as investment companies may be potentially misleading,” the letter continued.

Despite the minor setback, analysts are optimistic that the ETF issuers and the SEC will reach an agreement. “REX lawyers say they can work it out,” Bloomberg ETF analyst Eric Balchunas wrote in a May 31 X post. “Issuers are pushing the envelope hard in an effort to get first to market,” the analyst continued.

Crypto investors and traders continue closely monitoring the approval of altcoin and staking ETFs in the United States, as the listing of these investment vehicles is expected to bring fresh liquidity from the traditional financial markets into crypto.

Related: Crypto industry urges SEC to clarify staking stance

SEC delays staking ETF decision despite recent guidance

Despite the SEC issuing recent guidance that crypto staking does not violate securities laws and does not fall under the purview of securities transactions, the SEC continues to delay the decision on staked and altcoin ETFs.

According to Bloomberg ETF analyst James Seyffart, the delays were expected and are not out of the norm.

“Almost all of these filings have final due dates in October,” Seyffart wrote, adding that it is uncommon for ETF applications to be approved so early.

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