Lawmakers Challenge SEC's Stance on Staking in Exchange-Traded Products

For far too long, the U.S. has been falling behind the rest of the world on staking policy. Now, in just the first 30 days of the Trump Administration

A bipartisan group of U.S. lawmakers have called on the Securities and Exchange Commission (SEC) to reconsider its stance on excluding protocol staking from exchange-traded products (ETPs).

In a letter dated March 3 to SEC Commissioners Caroline Pham and Mark Uyeda, Senators Cynthia Lummis (R-WY), Kirsten Gillibrand (D-NY), Steve Daines (R-Montana), Bill Hagerty (R-Tenn.), Thom Tillis (R-NC), Bernie Moreno (R-Ohio) and Ron Wyden (D-OR) highlighted the importance of staking in proof-of-stake (PoS) networks like Ethereum.

The lawmakers argued that the SEC’s directive to exclude staking within ETPs is based on a faulty understanding of how the technology works. They explained that staking is not an investment product in itself, but rather a fundamental technical requirement for securing and validating transactions on PoS networks.

“When token holders stake their assets, they contribute to the network’s security, and in doing so earn rewards generated by the protocol itself — not from any centralized authority,” the letter reads.

The senators went on to express concerns about America’s competitive position in global digital asset markets, as other major financial centers have embraced staking in their digital asset ETPs.

“While the United States hesitates, other major financial centers including Switzerland, Canada, Germany and Australia have recognized [staking’s] integral role in network security and operational stability,” they wrote.

The lawmakers also noted that because staking is essential for securing PoS networks, if there were no one staking their ether (ETH), then all of the assets within these ETPs would be at risk.

“This means that, perversely, the SEC has forced American investors into a position where their investments are only protected by assets held in other jurisdictions,” the letter adds.

Crucially, the impact of these regulations extends beyond just the Ethereum blockchain, but applies to possible future ETPs of other networks that also use proof-of-stake such as Solana, Avalanche and Polkadot. As the digital asset sector grows, the impact of this misguided regulation will only deepen.

“Getting this regulation wrong hurts both American investors and the U.S. economy,” the senators wrote.

“Either investors accept domestic products without staking and the associated rewards, limiting their financial returns, or they seek exposure through off-shore alternatives, driving capital offshore and out of U.S. stock exchanges.”

The lawmakers concluded by urging the SEC to permit staking in ETPs, which they believe would align with both the agency’s mandate to protect investors and the goal of maintaining U.S. leadership in global financial markets.