SEC Crypto Task Force meets with Jito and Multicoin to discuss staking in crypto ETFs

Jito Labs and Multicoin Capital are one of the many organizations to have had meetings with the Crypto Task Force, the U.S. Securities and Exchange Commission’s division set up to rewrite crypto policy, according to meeting notes from the regulator published Friday. The groups met about two weeks ago, shortly after the task force was set up, to discuss the ability to include staking as a feature in exchange-traded products. 

The SEC is currently weighing several proposals for Solana ETFs amid a flurry of filings from asset managers and exchanges looking to list alternative crypto ETFs. Last year, VanEck became the first firm to file for an SOL exchange-listed product, aiming to secure a first-mover advantage in anticipation of a potential regulatory shift favoring the industry if Trump won the election.

According to the meeting notes, Managing Partner Kyle Samani and general counsel Greg Xethalis, Jito Labs CEO Lucas Bruder and Chief Legal Officer Rebecca Rettig and SEC staffers didn’t just talk about staking and restaking in the abstract but actual models that could make it a reality in these products. 

“Restricting staking in cryptoasset ETPs harms (i) investors, by crippling the productivity of the underlying asset and depriving investors of potential returns, and (ii) network security, by preventing a significant portion of an asset’s circulating supply from being staked,” the meeting notes read. 

Staking refers to the process of using validators to secure a proof-of-stake network by locking up assets, which then accrue rewards. 

The “two viable paths” the task force is apparently considering include either allowing a certain portion of an ETP's assets under management to be staked via service providers who run validators or minting a liquid staking token for every native asset being staked, which in a way would represent a form of redemption. 

According to the document, there were three main reasons the SEC has historically hesitated to allow staking ETFs. Namely, the lockup “unbonding periods” could conceivably slow down the redemption process for investors and complicate tax implications. There are also unanswered questions about whether “staking as a service creates a securities transaction.”