Franklin Templeton seeks SEC approval for a Solana ETF involving staking

Franklin Templeton, one of the world's largest investment managers, is looking to include staking in its proposal for a Solana exchange-traded fund to the U.S. Securities and Exchange Commission.

The firm's registration statement posted on Friday included language around language on staking for a proposed Franklin Solana ETF.

"In consideration for any staking activity in which the Fund may engage, the Fund would receive certain staking rewards of Solana tokens, which may be treated as income to the Fund," according to the filing.

Shares would be listed on the Cboe BZX Exchange, and the custodian will be Coinbase Custody Trust Company, LLC, the firm said. 

Multiple firms are now vying for a spot Solana ETF following a change to a more crypto-friendly administration and as new SEC leadership takes shape. During the previous administration, former SEC Chair Gary Gensler had been weary of crypto, but following a groundbreaking lawsuit brought by Grayscale over spot bitcoin ETFs, the regulator later approved those products. Soon after, the SEC also greenlit Ethereum ETFs. 

Firms have since met with the agency to discuss staking. Last week, the agency's newly created crypto task force met with Jito Labs and Multicoin Capital to discuss the possibility of including staking into exchange-traded products.  

Franklin Templeton's move to include staking comes after others have looked to do the same for Ethereum ETFs. The New York Stock Exchange asked the SEC to allow staking for Grayscale's Ethereum ETFs, and Cboe BZX Exchange is looking to get the SEC's sign-off for 21Shares' Ethereum ETF. 

"I think staking will ultimately be allowed for all proof-of-stake assets inside an ETF wrapper," Bloomberg ETF analyst James Seyffart told The Block. "It’s just more a matter of when at this point."

Rules around staking are still needed, and filings for Ethereum ETF staking will have deadlines before those for Solana, he added. 

Many firms cut staking out of their registration statements ahead of the agency's sign-off on spot Ethereum ETFs last year. Gensler had previously said proof-of-stake tokens are securities. 

Staking comes up in Washington

Also this week, Sens. Cynthia Lummis, R-Wyo., Kirsten Gillibrand D-N.Y., Ron Wyden D-Ore., penned a letter to the SEC asking for it to clarity its position on staking in crypto exchange-traded products. 

"In 2024, the SEC approved the registration of multiple ETPs — however, staking was removed from these ETP's S-1 filings due to regulatory pressure from the SEC," they said. "While only Congress can create a comprehensive regulatory framework for digital assets, greater clarity around the decision to prevent staking products in the recent S-1 approvals would help facilitate understanding of the SEC's current regulatory stance, as well as highlight areas where legislation could be needed."

In not allowing staking in ETPs, the SEC is "weakening the resilience and integrity of the data stored on certain distributed ledgers," they said. 

Lummis, who is leading the Senate Banking Committee's digital asset focused panel, is set to hold a hearing next week titled "Exploring Bipartisan Legislative Frameworks for Digital Assets." 

Update: Feb. 21, 10:40 p.m. UTC to include more details