In a recent twist involving the proposed Ethereum exchange-traded fund (ETF) collaboration between ARK Invest and 21Shares, significant adjustments have been made to exclude proof of stake from the fund. This drastic change was prompted by concerns raised by the Securities and Exchange Commission (SEC) about staking, which they deemed a security, leading to the urgent revision.

Originally, ARK Invest and 21Shares had included staking options for the ARK 21Shares Ethereum ETF in their initial filings, but this latest amendment has completely eradicated this particular feature. Following this turn of events, analysts have swiftly altered their outlook on the likelihood of SEC approval, with one analyst slashing the odds from a lofty 70% to a meager 25%.

The SEC's rigid stance on staking, viewing it through the lens of security measures, has cast a shadow of doubt over the prospects of obtaining approval for a spot Ethereum ETF. The inclinations of SEC Chairman Gary Gensler to categorize ETH as a security have only added to the overall uncertainty surrounding this issue. Of significant note is the looming deadline for the SEC to come to a decision on the Ethereum ETF proposals, scheduled for May 23, with anticipations of rejection mounting in the industry.

The ARK 21Shares Ethereum ETF, formally filed back in September 2023, sets out to offer investors direct access to ether on the Cboe BZX Exchange, relying on the CME CF Ether-Dollar Reference Rate. Within this setup, 21Shares operates as the trust sponsor, while the responsibilities of trustee and ether custodian fall on Delaware Trust Company and Coinbase Custody Trust Company, respectively. ARK Investment Management stands at the helm of managing the fund, proposing a unique investment vehicle for potential investors.

Despite the evolving nature of the industry and the recent modifications hinting at discussions between the SEC and the ETF applicants, the underlying rationales for these sweeping changes have been shrouded in mystery. The revised strategy underscores a deliberate shift in their approach, likely aimed at ensuring full compliance with SEC regulations, a pivotal aspect in their pursuit of approval.

As neither ARK Invest nor 21Shares have provided any official commentary on the recently made amendments, it is clear that the ever-changing regulatory ambience surrounding Ethereum and staking poses a formidable challenge to securing an ETF approval. This, in turn, has significantly dampened initial enthusiasm within the industry, leaving industry observers with an air of trepidation as they await further developments.