SEC has done something very rare: It issued a negative opinion on ETF applications for two altcoins!

In the US, an groundbreaking initiative to launch exchange-traded funds based on cryptocurrencies offering staking rewards (ETF) has faced regulatory uncertainty.

Two new Ethereum and Solana-focused ETFs planned to be launched by REX Financial and Osprey Funds have raised new questions about the legal status of the funds, even though the U.S. Securities and Exchange Commission has granted the initial registration approval.

The SEC stated that the funds in question may not meet the definition of an "investment company" under federal securities laws. This means that the funds are unable to fulfill one of the essential legal conditions required for trading on an exchange.

SEC officials, in a letter sent to the fund issuer named ETF Opportunities Trust, stated that the registration of two ETFs as "investment companies" may have been done incorrectly and that the statements made could be misleading. These funds aimed to enable investors to earn staking rewards in cryptocurrencies such as Ethereum and Solana.

REX Financial Chief Legal Advisor Greg Collett stated in his remarks on the matter, "We believe we can address the SEC's concerns regarding the definition of an investment company, and we do not plan to launch the funds until this issue is resolved." The SEC, on the other hand, refused to comment beyond the content of the letter.

Bloomberg Intelligence ETF analyst James Seyffart stated, "Even if the SEC does not allow the listing of this structure, we believe that ETF initiatives with a simpler structure that include staking will ultimately be successful. It is just a matter of time. However, the SEC seems not to be too pleased with REX’s method of rapidly advancing these applications."

This was the SEC's second open intervention in recent months regarding ETFs that invest in alternative asset classes. In March, the SEC publicly criticized the world's first ETF, offered by State Street Corp. and Apollo Global Management, which invests in the private credit market, just hours after it started listing.

REX announced yesterday that it has received "effective registration" for the two ETFs in question and that the funds can now be traded on the exchange. REX's founder Greg King stated that both funds are planned to be launched in mid-June.

In its letter, the SEC stated, "As long as these concerns are not addressed, appropriate steps will be considered to ensure compliance with federal securities laws."

*It is not investment advice.

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