SEC opens door for US Spot-Ether ETFs in landmark for crypto

Matt Levine had some interesting commentary earlier today about staking:

The situation is roughly:

1. The SEC hates crypto and would like to block crypto spot ETFs, that is, ETFs that directly hold the underlying cryptocurrency.
2. But it lost a court case over this and was forced to approve spot Bitcoin ETFs. (Bitcoin has no staking mechanism.)
3. Now, issuers are asking it to approve spot Ether ETFs, and since it approved Bitcoin ETFs it has no particularly principled reason to say no.
4. But there is a distinction between Ether and Bitcoin, which is that Ether can be staked.
5. Potential Ether ETF issuers would love to be able to stake their Ether: The staking rewards would make an Ether ETF more attractive, and might provide some revenue to the issuer.
6. And they originally proposed that, but then “eliminated plans” for staking from their filings, presumably because the SEC glared at them meaningfully.
7. So Ether ETFs will launch without staking, so they won’t pay “interest,” which will make them a bit less economically attractive than holding Ether directly and participating in staking.

Fine. But. It seems to me that Ether ETFs have a crucial advantage here. They are securities. A spot Ether ETF just is a security. It is registered with the SEC. It is issued by a company — Fidelity, Ark — whose whole business is issuing SEC-registered securities. (Specifically, public funds, but those are securities too.)

...

But those issues are probably solvable, and the spot Ether ETFs have already solved the harder US regulator issue, which is: They are packaging Ether in an SEC-registered security. Meanwhile every other way to get staking rewards from Ether — staking with a crypto exchange or a decentralized platform, etc. — has not solved that issue. If you hold Ether yourself and deposit them with a crypto exchange to earn staking rewards, the SEC might eventually go after the exchange for issuing unregistered securities. If the SEC has its way, ultimately, nobody will be able to offer Ethereum staking rewards outside of a security. But Ethers in an ETF are inside a security!

He quotes some cryptocurrency folks who are happy with the ETF's not doing staking because they'd like Ethereum to be more decentralized, but then asks:

Doesn’t the SEC want Ether to be centralized and under the control of SEC-regulated securities issuers?

It would be a funny result if Ethereum ended up mostly run on the computers of Wall Street financial firms. Hopefully at multiple firms, so as not to be too centralized? But the SEC could regulate them, and maybe indirectly regulate Ethereum. (Presumably by glaring meaningfully.)