Notice2025-03336
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To Amend the Grayscale Ethereum Trust ETF and Grayscale Ethereum Mini Trust ETF To Permit Staking of the Ether Held by the Trusts
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
March 3, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 40 (Monday, March 3, 2025)</title>
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[Federal Register Volume 90, Number 40 (Monday, March 3, 2025)]
[Notices]
[Pages 11081-11084]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-03336]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102485; File No. SR-NYSEARCA-2025-13]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To Amend the Grayscale Ethereum Trust ETF and
Grayscale Ethereum Mini Trust ETF To Permit Staking of the Ether Held
by the Trusts
February 25, 2025.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on February 14, 2025, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the Grayscale Ethereum Trust ETF
(the ``Trust'') and Grayscale Ethereum Mini Trust ETF (the ``Mini
Trust'' and, together with the Trust, the ``Trusts''),
[[Page 11082]]
shares of which have been approved by the Commission to list and trade
on the Exchange pursuant to Rule 8.201-E (Commodity-Based Trust
Shares), to permit staking of the ether held by the Trusts. The
proposed rule change is available on the Exchange's website at <a href="http://www.nyse.com">http://www.nyse.com</a>, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Trusts, shares of which have
been approved by the Commission to list and trade on the Exchange
pursuant to Rule 8.201-E (Commodity-Based Trust Shares), to permit
staking of the ether held by each of the Trusts.
Background
The Commission approved the listing and trading of shares of the
Trust (the ``Trust Shares'') on the Exchange under Rule 8.201-E on May
23, 2024 \4\ and the listing and trading of shares of the Mini Trust
(the ``Mini Trust Shares'') on the Exchange under Rule 8.201-E on July
17, 2024.\5\
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\4\ See Securities Exchange Act Release No. 100224 (May 23,
2024), 89 FR 46937 (May 30, 2024) (SR-NYSEARCA-2023-70; SR-NYSEARCA-
2024-31; SR-NASDAQ-2023-045; SR-CboeBZX-2023-069; SR-CboeBZX-2023-
070; SR-CboeBZX-2023-087; SR-CboeBZX-2023-095; SR-CboeBZX-2024-018)
(Order Granting Accelerated Approval of Proposed Rule Changes, as
Modified by Amendments Thereto, to List and Trade Shares of Ether-
Based Exchange-Traded Products).
\5\ See Securities Exchange Act Release No. 100541 (July 17,
2024), 89 FR 59786 (July 23, 2024) (SR- NYSEARCA-2024-44; SR-
NYSEARCA-2024-53) (Order Granting Approval of Proposed Rule Changes
To List and Trade Shares of the Grayscale Ethereum Mini Trust and
ProShares Ethereum ETF).
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Rule 8.201-E governs the listing and trading of Commodity-Based
Trust Shares. Commodity-Based Trust Shares are securities issued by a
trust that represents investors' discrete identifiable and undivided
beneficial ownership interest in the commodities deposited into the
trust. The Trust Shares are issued by the Trust, and the Mini Trust
Shares are issued by the Mini Trust. Each of the Trusts is a Delaware
statutory trust.
Proposed Rule Change
The Exchange proposes to amend Amendment No. 2 to the Trust Shares
filing \6\ (the ``Trust Shares Filing'') and Amendment No. 3 to the
Mini Trust Shares filing \7\ (the ``Mini Trust Shares Filing'') as
described below to allow the staking of the ether held by each of the
Trusts. Specifically, the Exchange proposes to add the following
``Staking'' section following the ``Custody of the Trust's Ether''
section in the Trust Shares Filing and in the Mini Trust Shares Filing:
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\6\ See Securities Exchange Act Release No. 100217 (May 22,
2024), 89 FR 46441 (May 29, 2024) (SR-NYSEARCA-2023-70) (Notice of
Filing of Amendment No. 2 to a Proposed Rule Change To List and
Trade Shares of the Grayscale Ethereum Trust).
\7\ See Securities Exchange Act Release No. 100233 (May 28,
2024), 89 FR 47618 (June 3, 2024) (SR-NYSEARCA-2024-44) (Notice of
Filing of Proposed Rule Change, as Modified by Amendment No. 3, To
List and Trade Shares of the Grayscale Ethereum Mini Trust).
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Staking
The Sponsor may, from time to time, stake a portion of the Trust's
ether on behalf of the Trust through one or more trusted staking
providers, which may include the Custodian or an affiliate of the
Custodian (``Staking Providers''). However, the Sponsor will not
utilize any Staking Providers that are affiliates of the Sponsor. In
consideration for any staking activity in which the Trust may engage,
the Trust would receive certain staking rewards of ether tokens, which
may be treated as income to the Trust.
The Staking Process
As described in ``Proof-of-Stake Process'' above, the Merge amended
the Ethereum Network's consensus mechanism to a process known as proof-
of-stake. Proof-of-stake was intended to address the perceived
shortcomings of the proof-of-work consensus mechanism in terms of labor
intensity and duplicative computational effort expended by validators
(known under proof-of-work as ``miners''). In a proof-of-work consensus
mechanism, miners effectively compete to be the first in time to solve
the cryptographic puzzle that would allow them to be the only validator
permitted to validate the block and thus be the only ones to receive
the resulting block reward. Miners who are not first in time (and thus
are not permitted to be validators) will have effectively expended
significant labor and computing power for no gain. In a proof-of-stake
mechanism, by contrast, a single validator is randomly selected to
solve the cryptographic puzzle needed to validate a block, which it
proposes to a committee of other validators, who vote for whether to
include the block (or not). This proof-of-stake system reduces the
computational work performed--and energy expended--to validate each
block compared to proof-of-work.
New ether is created as a result of the staking of ether by
validators. Validators are required to stake ether in order to be
selected to perform validation activities and then once selected, as a
reward, they earn newly created ether. Validation activities include
verifying transactions, storing data, and adding to the Ethereum
blockchain. To operate a node on the Ethereum blockchain, a validator
must acquire and lock 32 ether by sending a special transaction to the
staking contract. This transaction associates the staked ether with a
withdrawal address (to unlock the ether and receive any staking
rewards) and a validator address (to designate the validator node
performing transaction verification).
Staking by the Sponsor on Behalf of the Trust
The Sponsor may, from time to time, stake a portion of the Trust's
ether on behalf of the Trust through one or more Staking Providers. The
Sponsor expects to maintain sufficient liquidity in the Trust to
satisfy redemptions. The ether staked by the Sponsor on behalf of the
Trust will consist exclusively of ether owned by the Trust. The
Sponsor's staking activities on behalf of the Trust will not constitute
``delegated staking'' and will not form part of a ``staking as a
service'' offering. As further discussed below, the Sponsor believes
its activities in relation to staking the ether held by the Trust on
behalf of the Trust are materially different from the delegated staking
and ``staking as a service'' activities that the SEC has alleged to
involve securities offerings in violation of Section 5 of the
Securities Act of 1933.\8\
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\8\ See, e.g., SEC v. Payward Ventures, Inc. and Payward
Trading, Ltd. (filed February 9, 2023), available at <a href="https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-25.pdf">https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-25.pdf</a>; SEC
v. Binance Holdings Limited, et al. (filed June 5, 2023), available
at <a href="https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-101.pdf">https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-101.pdf</a>; SEC v. Coinbase, Inc. and Coinbase Global (filed June 6,
2023), available at <a href="https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-102.pdf">https://www.sec.gov/files/litigation/complaints/2023/comp-pr2023-102.pdf</a>.
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First, the Sponsor will only stake the ether held by the Trust. The
Sponsor
[[Page 11083]]
will not seek to pool the ether held by the Trust with ether held by
other entities (although such pooling may occur at the level of a
Staking Provider). Second, the Sponsor will not advertise itself as
providing any staking services generally, or promise any specific level
of return from staking, or solicit delegated stakes from entities other
than the Trust. Third, the Sponsor has stated that it is staking the
Trust's ether solely in order to maximize the Trust's revenue
generation opportunities, and to generate returns for the Trust's
shareholders. Fourth, the Sponsor will not bear or subsidize the risk
of slashing on behalf of the Trust. Staking by the Sponsor will not
result in the ether held by the Trust moving out of the custody of the
Custodian. In order to stake the Trust's ether, Sponsor will use an
interface through which an entity can initiate staking by selecting the
ether assets to be staked. This process does not involve the staked
ether leaving the wallet at which it is held, and accordingly reduces
the risk of loss of ether through theft at the node while the asset is
staked (although this process will not reduce the risk of loss of the
ether through slashing).
Except for the changes described above, all other representations
in the Trust Shares Filing and the Mini Trust Shares Filing remain
unchanged and will continue to constitute continued listing
requirements. In addition, the Trusts will continue to comply with the
terms of the Trust Shares Filing and Mini Trust Shares Filing, as
applicable, and the requirements in Rule 8.201-E.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) \9\ of
the Act. Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \10\ requirements that the rules
of an exchange be designed to prevent fraudulent and manipulative acts
and practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
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\9\ 15 U.S.C. 78f(b)(5).
\10\ 15 U.S.C. 78f(b)(5).
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The Exchange believes the proposed rule change is designed to
remove impediments to and perfect the mechanism of a free and open
market and, in general, to protect investors and the public interest
because it would allow the Trusts to stake ether on behalf of their
investors. The Ethereum Network allows for staking of its native asset,
ether tokens, and permits validators who successfully stake ether to
receive rewards in the form of more ether tokens. The net beneficiaries
are not only validators, or those on behalf of whom they stake ether,
but also the Ethereum Blockchain itself, which grows and is
progressively made more secure through the validation of transactions.
Staking permits validators to contribute to the Ethereum Network by
staking their tokens to secure the Ethereum Blockchain, facilitating
the creation of blocks, and helping process transactions. Validators
are compensated for fulfilling this important role through transaction
fees and consensus rewards paid by the blockchain itself.
Staking through mechanisms such as ``point-and-click'' staking
would also permit the earning of rewards without certain additional
risks to the tokens held by the Trusts' respective Custodians on behalf
of each of the Trusts. Allowing the Trusts to stake their ether would
benefit investors by permitting the Trusts to exercise their rights to
free additional ether and help the Trusts better track the returns
associated with holding ether. Permitting the Trusts to engage in
staking would improve the creation and redemption process for both
Authorized Participants and the Trusts, increase efficiency, and
ultimately benefit the end investors in the Trusts.
As noted above, except for the proposed change to allow the Trusts
to engage in staking of ether, all other representations in the Trust
Shares Filing and the Mini Trust Shares Filing remain unchanged and
will continue to constitute continued listing requirements. In
addition, the Trusts will continue to comply with the terms of the
Trust Shares Filing and the Mini Trust Shares Filing, as applicable,
and the requirements in Rule 8.201-E.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Act. As discussed above, the
proposed change is intended to benefit investors and allow the Trusts
to better track the returns associated with holding ether.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#e290978e87cf818d8f8f878c9691a2918781cc858d94"><span class="__cf_email__" data-cfemail="2b595e474e06484446464e455f586b584e48054c445d">[email protected]</span></a>. Please include
file number SR-NYSEARCA-2025-13 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NYSEARCA-2025-13. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the
[[Page 11084]]
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for website viewing and printing in the Commission's Public
Reference Room, 100 F Street NE, Washington, DC 20549, on official
business days between the hours of 10 a.m. and 3 p.m. Copies of the
filing also will be available for inspection and copying at the
principal office of the Exchange. Do not include personal identifiable
information in submissions; you should submit only information that you
wish to make available publicly. We may redact in part or withhold
entirely from publication submitted material that is obscene or subject
to copyright protection. All submissions should refer to file number
SR-NYSEARCA-2025-13 and should be submitted on or before March 24, 2025
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-03336 Filed 2-28-25; 8:45 am]
BILLING CODE 8011-01-P
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