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REX is encountering regulatory hurdles from the U.S. Securities and Exchange Commission (SEC) regarding its applied Solana (SOL) and Ethereum (ETH) ETF staking provisions. The firm had anticipated a fast-tracked approval but now faces potential delays following the SEC’s identification of legal issues in its application.

Initially, REX-Osprey submitted an application on May 30 under the Investment Company Act of 1940, aiming to expedite its market launch. Bloomberg ETF analyst James Seyffart had expressed optimism about a swift approval, suggesting that the launch could occur within weeks, given the unique structure of the 40-Act funds and their exclusion from the 19b-4 process.

However, the SEC has challenged the validity of REX’s submission. In a letter to ETF Opportunities, the law firm managing REX’s applications, the SEC raised concerns regarding the improper filing of the registration statement on Form N-1A, indicating potential misleading disclosures about the funds' status as investment companies. Seyffart speculated that the SEC’s issue is that these products might not meet the criteria for 6c-11, a provision designed to streamline the ETF application process.

Despite these setbacks, some experts remain optimistic. Nate Geraci from ETF Store predicted that the approval would come before the end of the year, suggesting that both spot SOL ETFs and staking-enabled ETH and SOL ETFs would gain approval. Greg Collett, general counsel at REX Financial, stated confidence in addressing the SEC’s concerns regarding the investment company status.

SEC's recent clarification that most staking services for cryptocurrencies like SOL and ETH do not qualify as security offerings has increased the likelihood of eventual approval for ETF staking. Meanwhile, the market awaits the outcome of Grayscale’s ETH ETF staking application, which was filed under the Securities Exchange Act of 1934, with a decision deadline of June 1.

In the market, ETH was trading at $2,400, marking a 35% increase over the past 30 days with sentiment leaning towards 'greed', while SOL traded at $153, up 4% in the past month with a neutral market sentiment.