A new line of yield-chasing crypto funds is forcing the Securities and Exchange Commission to confront unresolved gaps in its regulatory framework, just as the Trump administration eases oversight of digital assets.

The immediate dispute centres on two proposed funds from ETF firms REX Financial and Osprey Funds that would allow investors to earn rewards by deploying Ether and Solana tokens to help validate blockchain transactions, a process known as staking. The firms said they had cleared an initial SEC registration hurdle last week, but agency staff took the unusual step of objecting that very same evening. Staff warned the products may not meet standards to qualify as investment companies under federal law, raising broader questions about the regulation of a hot corner of the crypto-investment world.

SEC staff noted that to meet the definition of an investment company, a firm must primarily invest in securities. That’s a problem when it comes to digital assets: there are no clear lines around what crypto activities trip securities laws and what don’t. Read more