Ethereum ETF staking: Novogratz sees shift in SEC’s stance in 2 years

• Novogratz expects US ETH ETF staking in two years. 
• However, regulatory and Ethereum concentration risks still exist for ETH ETF staking. 

Galaxy Digital’s Mike Novogratz claimed that staking for US spot Ethereum [ETH] ETFs will eventually happen despite the current SEC’s stance. 

In an interview on the sidelines of the Consensus 2024, Novogratz maintained that ‘you’d rather get a yield than not get a yield.’ When asked when such would happen to the US spot Ethereum ETFs, Novogratz said, 

‘’I would argue that within 12-24 months after the ETH ETFs without staking happen, they will change the rules and allow staking.’ 

Bloomberg ETF analyst Eric Balchunas estimated the approval of registration statements (S-1s) and the effective launch of the spot ETH ETF products by June or July. If so, Novogratz’s staking projection would be around mid-2025 or mid-2026. 

SEC’s staking stance and risks

The US SEC has always opposed crypto staking. Last year, Kraken settled with the agency for $30 million and shuttered its US staking operation. 

Additionally, potential US spot Ethereum ETF issuers dropped previous ‘staking provisions’ on the 19b-4s forms before the SEC approved them on 23rd May. That indicated that the ‘staking provisions’ could have been compliance hurdles for the approvals. 

Besides, there have been worries that US spot ETH ETF staking could increase the Ethereum network’s centralization risks. 

According to an S&P Global report, ETH ETF staking could be positive and negative. On the positive side, S&P Global noted, 

“The participation of institutional custodians could reduce the current concentration on the Lido decentralized staking platform’ 

Despite shedding part of its market share on ETH staking, Lido still dominated the market at 28%, followed by Coinbase at 13% and Ether.Fi at 3% amongst the top three leaders. 

On the negative, the S&P Global warned that, 

‘It may also introduce new concentration risk, particularly if a single entity is chosen to stake the bulk of ETH included in these ETFs’ 

However, according to a recent Bloomberg report, Hong Kong planned to approve the spot ETH ETF staking. 

Although there was no official timeline for the plan, market watchers believe it could bolster demand for Hong Kong’s spot ETH ETFs despite their lukewarm debut in late April. 

It remains to be seen whether the US regulator will follow Hong Kong’s lead and make a U-turn on staking and its potential impact on the security of the Ethereum network.