Why should SEC be allowed to staking on products traded on exchanges?

For a long time, the US has lagged behind other parts of the world in staking policies. Currently, in the first 30 days of the Trump administration, staking has been mentioned in Congressional hearings and is listed as a top priority by the SEC’s newly created cryptographic task force, and today it is the focus of bipartisan letters from lawmakers challenging the past SEC attitudes when the digital asset sector is approved, when the digital asset sector is awarded, when the digital asset sector is awarded, when the digital asset sector is awarded, when the digital asset sector is awarded, when the digital asset sector is awarded, when the digital asset sector is awarded, when the digital asset sector is established. This was a major step forward for the second largest cryptocurrency, achieving legitimacy in the eyes of US regulators. However, among these financial instruments there was one obvious omission. By doing that, it is the ability to wager the assets and profits held.

Currently, Senator Cynthia Ramis (R-WY), Kirsten Gillibrand (D-NY), Steve Daines (R-Montana), Bill Hagerty (R-Tenn.), Tom Tillis (R-NC), Bernie Moreno (R-OHIO) and RON WYDEN (D-OR). In a letter delivered to the Securities and Exchange Commission on Friday, they challenged the SEC’s directive to rule out staking protocols at ETP, highlighting how this position can undermine both investor protection and the competitiveness of the US market.

The SEC’s ban on staking within ETPS is based on a false understanding of how staking works in proven stake networks like Ethereum. Staking is not an investment product in itself. Rather, it is a fundamental technical requirement to secure and verify transactions on a proven network. When token holders bet their assets, they contribute to the security of the network, thus earning rewards generated by the protocol itself, not from intensive authorities.

International competitiveness

The SEC’s directive to spot Ether ETP issuers to eliminate Ether ETP issuers raises serious concerns about America’s competitiveness in the global digital asset market. Although the US hesitates, other major financial centres, including Switzerland, Canada, Germany and Australia, recognize their integral role in network security and operational stability, employing digital asset ETP. Last month, the UK issued statutory measures that allow the arrangement of staking of qualified crypto assets to be equivalent to a collective investment scheme and to strengthen its importance in securing and maintaining blockchain networks.

Staking is essential to ensuring a network of proofs, which means that all assets within these ETPs will be at risk if no one is staking the ether. This, on the contrary, means that the SEC has been forced on American investors to a position where their investments are protected only by assets held in other jurisdictions.

Importantly, the impact of these regulations exceeds only the Ethereum blockchain, but will also apply to future ETPs in other networks that use demonstrations of proofs such as Solana, Avalanche, and Polkadot. As the digital asset sector grows, the impact of this false regulation only gets deeper.

Misleading these regulations hurts both American investors and the US economy. Investors accept domestic products without penetration, accept the compensation associated with them, limit financial gains or seek exposure through offshore alternatives, and drive capital to offshore and US stock exchanges. Without staking, Ether ETP holders gradually lose their relative network ownership position due to the inflationary nature of wagering.

This economic reality makes US products less competitive and less attractive to investors looking for comprehensive exposure to the Ethereum ecosystem. This even more troubling result appears to contradict the SEC’s central mission of investor protection. Perhaps it could push investors to investment vehicles in other jurisdictions that may not meet the investor protection standards available to US investors.

When managed by sophisticated valiters, the technical risks associated with staking are minimal and well understood. The often cited “thrashing risk” – the penalty mechanism for fraudulent verification attempts – has affected only 0.001% of the ether stained so far. This data suggests that the SEC’s careful stance may be disproportionate to actual risks.

What is in danger?

American investors remain at a clear disadvantage as they await the SEC’s response to key questions raised by Congress. Passforwards need a balanced approach that ensures that there is adequate surveillance when offered within a regulated investment product, while also realizing what it is: staking technical mechanisms for network security.

As the letter correctly points out, only Congress can create a comprehensive regulatory framework, but the SEC has the authority to allow ETP to be dyed. In doing so, it aligns both with the institutional mission to protect investors and with its goal of maintaining US leadership in global financial markets.

The bipartisan Congressional letter to Commissioners Uyeda and Peirce in support of Digital Asset ETPS staking protocols is a key milestone for both crypto-native and facility investors. With Uyeda criticising what is called “weaponization” of the SEC executive function and Crypto advocate Paul Atkins being appointed to take over the role of the SEC chair, it is rare that advances in one of the most common sense issues in the digital asset landscape.

It is beyond time for the SEC to assume leadership positions when it comes to protocol staking that strengthens the digital asset sector. This is fitting for the American economy and the aspirations of the Americans that depend on it.