Ark Invest Wants To Add Staking To Its Spot ETH ETF: Will The SEC Approve?

Ark Invest, the asset manager led by Cathie Wood, is seeking approval from the Securities and Exchange Commission (SEC) to add staking to its proposed Ethereum Spot ETF. In its recent filing, Ark included a detailed explanation of the Ethereum network and the role of its proof-of-stake consensus mechanism in maintaining decentralization. The firm mentioned its intention to stake a portion of the ETF’s assets through trusted third-party staking providers. Ark plans to stake Ether from its cold vault balance held by Coinbase, with the staking rewards being taxable income for shareholders. This move by Ark has added a new value proposition to crypto ETFs, as staking provides a real yield opportunity. However, there are risks associated with staking, such as potential losses due to malicious behavior by staking providers and liquidity issues during the unstaking process. Moreover, regulatory uncertainty poses a significant threat, as the SEC has not provided a clear stance on whether it considers Ether to be an unregistered security. Additionally, the regulatory status of the staking process itself remains unclear, as evidenced by the SEC’s lawsuit against Coinbase for failing to register its staking service.