Canary Capital files for staked Sei ETF as industry presses SEC for crypto staking clarity

Canary Capital filed an S-1 registration statement with the Securities and Exchange Commission late Wednesday in a bid to manage what could be the first spot Sei exchange-traded fund in the United States — including a staking component.

The proposed fund seeks to offer direct exposure to the price of SEI, the native cryptocurrency of the Sei network, held in custody by BitGo and Coinbase, according to the filing. 

The Trust intends to stake a portion of its assets through one or more infrastructure providers, potentially generating additional yield for investors. It would process share creations and redemptions in cash rather than in-kind — mirroring the structure used by existing spot Bitcoin and Ethereum ETFs in the U.S.

Sei is an EVM-compatible Layer 1 blockchain built using the Cosmos SDK, offering fast execution and IBC support for cross-chain interoperability. It seeks to combine the development standard of Ethereum with the performance of Solana.

Canary has filed for a slew of crypto ETFs in recent weeks, including funds tied to Pengu, Sui, Hedera and Litecoin. Its most recent application for a spot Tron ETF also included a staking element.

Earlier this month, the Sei Foundation launched the Sei Development Foundation to support the growth of the Sei protocol and advance crypto innovation in the U.S.

SEI is trading up 8.6% over the past 24 hours at $0.23, according to The Block’s Sei price page.

SEI/USD price chart. Image: The Block/TradingView.

XRP and Solana ETFs highest chance of approval

Other asset managers, such as Bitwise, Grayscale, Franklin Templeton and REX Shares are also looking to get the SEC’s green light for several spot crypto ETFs, including products focused on XRP, Solana, Dogecoin, Cardano, Avalanche, Hedera, Litecoin and Polkadot. The flurry comes amid a new era for the agency under the pro-crypto Trump administration, with expectations that it will offer a friendlier ear than in the previous Biden administration.

Bloomberg ETF analysts Eric Balchunas and James Seyffart updated their odds for spot crypto ETFs on Wednesday, placing Litecoin and Solana fund applications with the greatest chance of approval at 90%, followed by XRP funds on 85% and Dogecoin and Hedera filings at 80%. The analysts also suggested odds of 75% for Cardano, Avalanche and Polkadot ETF applications.

The agency previously approved the listing of spot Bitcoin ETFs in January 2024 and spot Ethereum ETFs later in July when former Chair Gary Gensler led the SEC. However, that only came after a decisive court ruling brought on by ETF issuer Grayscale and the agency is yet to approve another spot crypto ETF.

Since Donald Trump became president in January, the SEC has shown an openness to the crypto industry through public crypto roundtables while also dropping several lawsuits against crypto firms, with the industry-friendly Paul Atkins recently taking over the role as Chair. 

Industry leaders call on SEC for crypto staking clarity

The SEC has not approved any crypto ETF products incorporating a staking element, in contrast to their Canadian and European counterparts. Although spot Ethereum ETFs are already available in the U.S., these do not allow for the staking of any portion of the underlying assets.

On Wednesday, the Crypto Council for Innovation, alongside 30 key players from the industry, including a16zcrypto, Consensys, Galaxy, Kraken, Lido, MoonPay and Paradigm, submitted a letter to the SEC’s new Crypto Task Force, urging the agency to provide clear guidance on the regulatory treatment of staking and staking services under U.S. securities laws.

Staking is the process of locking up cryptocurrency to help secure a proof-of-stake blockchain and validate transactions. In return, participants earn rewards, typically in the same token.

The letter, addressed to Crypto Task Force lead Commissioner Hester Peirce, argues that staking is a technical process rather than an investment activity and urges the SEC to clarify that staking and related services are not securities transactions. It also calls for the SEC to support responsible inclusion of staking features in exchange-traded products and avoid overly prescriptive rules that could freeze market structures and stifle staking innovation.

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