REX Shares Files for Ethereum and Solana Staking ETFs

TLDR

• REX Shares files for Ethereum and Solana staking ETFs.
• ETFs utilize a C-corporation structure for staking.
• Trading could begin within weeks, pending approvals.

REX Shares has made a significant filing with the Securities and Exchange Commission (SEC) to introduce Ethereum (ETH) and Solana (SOL) staking ETFs. This move aims to provide traditional exchange-traded fund (ETF) investors with staking capabilities for these popular cryptocurrencies, marking a potential first for the U.S. market.

The filing uses an innovative structure that bypasses the standard 19b-4 process. Instead, it utilizes a 40-Act filing under the Investment Company Act of 1940. This approach might expedite the market debut of these ETFs.

Filing Strategy and Timing for Ethereum and Solana ETFs

According to a prospectus dated May 30, the ETFs employ a C-corporation structure—a rarity in the ETF industry. Each fund will own a wholly-owned subsidiary based in the Cayman Islands. These subsidiaries will acquire spot Ethereum and Solana and engage in protocol staking to earn native rewards.

James Seyffart, a Bloomberg ETF analyst, noted the unique approach taken by REX Shares. He commented on this development through social media, highlighting the clever legal and regulatory strategies used.

Although there is no confirmed launch date, trading could begin “within the next few weeks,” according to Seyffart. This depends on seed shares clearing through the Depository Trust Company and Nasdaq completing symbol reservation.

ETFs Targeting Cryptocurrency Staking Returns

REX Advisers will impose a management fee of 0.75% and handle ordinary operating costs. The C-corporation vehicle will also incur current and deferred U.S. income tax, resulting in estimated expenses for the first year of about 1.28% relative to the assets.

The main cryptocurrencies involved are Ethereum (ETH) and Solana (SOL), both utilizing proof-of-stake networks. These networks allow token holders to earn yield by staking their tokens, and these would be the first U.S.-listed ETFs to offer yield through such means.

Historical Perspective on Staking in ETFs

The incorporation of staking elements in ETFs has been eagerly awaited since the inaugural launch of spot Ether ETFs in July 2024. Many industry executives felt that Ethereum ETF products were incomplete without staking features.

The REX Shares filing signifies the initial substantial effort to integrate staking capabilities into U.S.-listed crypto ETFs, offering traditional investors the ability to earn staking rewards through familiar investment platforms.

James Seyffart stated, “As you can see in screenshot above. They will be getting their spot exposure to ETH and SOL via Cayman subsidiaries. All of this, assuming they launch in near future, is a bunch of clever legal and regulatory work-arounds to get these products to market.”

James Seyffart