The U.S. crypto investment market is set for a major transformation. With U.S. spot Bitcoin ETFs already commanding over $138 billion in market cap, investors’ attention is now shifting toward a new type of investment product: crypto ETF with staking.
The proposed Solana and Ethereum ETFs with staking are aimed at combining the regulatory structure of traditional ETFs with the yield-generating capabilities of staking. Let’s have a look, why they are being seen as the next frontier in crypto investing.
What are Staking Crypto ETFs?
A staking crypto ETF is a type of fund that provides investors with access to the price of a proof-of-stake (PoS) cryptocurrencies like Ethereum or Solana and can benefit from the staking rewards by helping in validating transactions on the network.
It is different from traditional crypto ETFs, which only track price movements. A staking crypto ETF helps the fund to earn rewards from staking, and either accrete them into the fund’s NAV (increasing share value), or distribute them as dividends, which creates taxable income for shareholders.
How Does It Work?
In direct staking on blockchains like Ethereum or Solana, participants can choose their validators and control settings. Whilst, in an ETF, this option is automatically institutionalized. Below are some points that explain how it works:
- Custodianship: The ETF holds crypto assets through regulated custodians like Coinbase Custody, Gemini, or BitGo.
- Delegation: The custodians delegate third parties such as Kiln, Figment, or Blockdaemon to the staking to validator nodes.
- Rewards distribution: Staking providers obtain the rewards from the network, charge their fees, and send the rest to the ETF.
- Fund Accounting: The fund may either reinvest the rewards (raising NAV) or pay them out periodically to shareholders.
Why Are Staking ETFs a Game Changer?
Below are some factors that explain why staking crypto ETFs are a game-changer:
1. Adds Yield to Crypto ETFs
Before the introduction of staking ETFs, these crypto ETFs only provided price exposure. With the staking feature added in ETFs, Ethereum and Solana ETFs can generate 1.9–2.2% in net yield, which will turn them into yield-bearing assets. If we compare it with gold ETFs, where lending yields are often under 1%, staking provides more income.
2. Attracts Income-Focused Investors
For investors who have not yet invested in Ethereum or Solana because of a lack of yield, staking ETFs present an entry point for them.
3. Expands Institutional Appeal
Tax-free endowments, retirement schemes, and hedge funds are keen on legitimate and transparent structures. By adopting ETFs such assets could easily circumvent legal, administrative, and operational obstacles while still providing access to native crypto economics. That could drive even more money into the Ethereum, Solana, and future PoS-based ETF products.
Ethereum ETFs with Staking: Status and Impact
Like Bitcoin ETFs, Ethereum is already seeing strong ETF inflows. For instance, BlackRock’s ETHA fund is recording multi-week inflow streaks. The prospect of staking is expected to enhance these flows further. As of now, around 28% of Ethereum’s total supply, which is around 34 million ETH, is already staked, which shows strong investor confidence in its yield-generating potential.
The SEC is currently reviewing applications from Bitwise and Franklin Templeton to include staking in their Ethereum ETF products. While Bitwise’s proposal is under formal review, a final decision could come as early as July 6, 2025, with the public input window open for approximately three weeks.
What Happens If Approved?
1. Boosts Ethereum’s Portfolio Role
Ethereum ETFs with staking offer a middle ground between risk assets and yield tools, which appeals to diversified asset allocation models. The Pectra upgrade in mid-2025, which increased the max stake per validator from 32 to 2,048 ETH, has made it easier and cheaper for custodians and ETF issuers to scale validator operations.
2. Connects Crypto to TradFi Income
Staking ETFs make Ethereum comparable to dividend stocks or REITs, giving investors a familiar income-generating asset type..
3. Positions ETH as Long-Term Asset
Staking rewards via ETFs incentivize longer holding periods, which shift Ethereum’s perception from volatile tech bet to utility-backed asset. With a growing stake supply, it reflects a trend making Ethereum a long-term holding.
4. Simplifies Staking for Investors
With the ETF handling validators and smart contract risk, investors no longer need technical knowledge to be involved in staking.
5. Marks Ethereum’s Financial Maturity
Staking-enabled ETFs reflect Ethereum growing into an institutional-grade asset with scalable income mechanisms under regulatory oversight.
Solana Staking ETF: A First-Mover Advantage?
Solana has taken the lead with the REX-Osprey SOL Staking ETF, which launched on Wednesday, July 2. It is different from standard SEC-registered ETFs; this product uses a C-corp structure, which is commonly found in energy funds, to bypass the slower SEC approval method. While this introduces double taxation, it helps faster product rollout and immediate access to staking rewards.
This ETF offers:
- Spot price exposure to Solana (SOL).
- Staking rewards are distributed to investors.
- Institutional-grade custody and operations.
When Spot Solana Staking ETFs Get Approval?
If the Canary Solana Staking ETF or similar SEC-approved staking ETFs gain popularity, the impact could transform both Solana’s investment narrative and may boost altcoin ETFs frameworks.
- Solana Becomes a Yield Asset: Built-in staking rewards shift SOL from a growth-only asset to a long-term income-generating instrument, which attracts investors who focus on income.
- Passive On-Chain Exposure: Investors can participate in Solana’s network security and operations without needing wallets, keys, or validator knowledge, thus, simplifying exposure to the DeFi ecosystem.
- ETF-Based Crypto Yield Plans: It allows wealth managers to create regulated, yield-focused crypto portfolios, a new toolkit for passive income in digital assets.
- Strong Demand & Wallet Growth: Active wallets holding ≥0.1 SOL have reached 11.44 million, which is driven by ETF anticipation. Analysts at Presto Research believe even $150 million in inflows would mark a strong ETF debut, reflecting growing market confidence.
- Blueprint for Altcoin ETFs: A successful Solana ETF with staking could set regulatory and operational standards for upcoming PoS assets like Ethereum and ADA.
- Boosts Long-Term Holding: Staking rewards encourage buy-and-hold behavior, which increases ecosystem stability and liquidity over time.
What About Risks and Limitations?
No investment is without risks; here are some risks and limitations involved in staking ETFs:
- Slashing Risk: While very rare, mistakes from the validator could result in penalties. This would impact the ETF’s NAV, meaning that all shareholders will be affected equally.
- Liquidity Constraints: Staked ETH or SOL has an unbonding period (e.g., 9–50 days for Ethereum), so funds must hold liquid reserves, reducing yield.
- Tax Implications: The rise in NAV will push taxes away until the dividend payments cause immediate tax events. The final IRS ruling will determine how investors are classified..
- Yield Compression: Provider fees, validator’s deductions, and reserves for the most adverse cases of the market decrease the net yield compared to direct staking.
The Bigger Picture: Redefining Crypto Allocation
If Ethereum and Solana staking ETFs succeed in the market, then asset managers may introduce hybrid ETFs that combine Bitcoin-like stability with yield-bearing PoS assets like ETH, SOL, or DOT. This could be beneficial for investors who want both capital appreciation and steady crypto income in one regulated product.
Such hybrid or multi-chain ETF baskets would provide diversified yield streams and simplify crypto exposure. They could also enable broader portfolio strategies, giving institutions a passive way to tap into multiple blockchain ecosystems with varying risk-reward profiles.
Bottom Line
The launch and potential approval of staking-enabled Ethereum and Solana ETFs could mark a turning point in the development of crypto investing. These products merge the reliability of traditional finance with the innovation of blockchain protocols, bringing passive crypto income to a broader and regulated investor base.
Also Read: XRP ETF Approval Soon? How BlackRock’s Filing Could Change the Game
