SEC Eyes Staking Rewards for Bitwise's Ethereum ETF Fund
Published Date: 4/7/2025
Notice
Summary
NYSE Arca wants to update the Bitwise Ethereum ETF so it can stake the Ether it holds, which means the ETF could earn extra rewards from the crypto. This change affects investors in the Bitwise Ethereum ETF and could boost the fund’s value over time. The proposal is open for public comments now, with potential trading benefits coming if approved.
Analyzed Economic Effects
5 provisions identified: 3 benefits, 2 costs, 0 mixed.
Bitwise ETF May Stake Its Ether
If you own shares of the Bitwise Ethereum ETF, NYSE Arca has proposed allowing the Trust to stake a portion of the Ether it holds through trusted staking providers to earn staking rewards. The filing was submitted March 20, 2025, amended March 24, 2025, published April 7, 2025, and is open for comments through April 28, 2025.
Sponsor Will Not Cover Slashing Losses
The Sponsor states it will not bear or subsidize the risk of 'slashing' (forfeiture of staked ether) on behalf of the Trust, meaning shareholders would remain exposed to losses from slashing events. The Sponsor also will not advertise delegated staking or solicit stakes from entities other than the Trust.
Staking Rewards May Be Trust Income
The Trust would receive staking rewards of ether tokens when it stakes, and those staking rewards may be treated as income to the Trust. That income characterization could affect how the Trust reports and distributes returns to shareholders.
Custody Kept; Point-and-Click Staking
The Sponsor says staking will not move the Trust's ether out of the Custodian's custody and will use 'point-and-click' staking, which does not transfer the staked ether from its wallet and may reduce theft risk at validator nodes. The Sponsor also says it will not pool the Trust's ether with ether held by other entities (though pooling may occur at the staking-provider level).
Staking Could Improve ETF Efficiency
The Exchange states that permitting the Trust to stake ether could improve the creation and redemption process, increase efficiency, and ultimately benefit end investors. The Exchange asserts these changes would help the Trust better track returns associated with holding ether.
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