The first SOL staking ETF in the United States has been launched! The era of institutional compliance and easy profits has begun.

Who launched it? What service providers are there? How to configure assets and stake? How will it affect the market?

Written by: KarenZ, Foresight News

This week, REX Shares officially confirmed that it will launch the Solana stake-based ETF "REX-Osprey SOL+Staking ETF" on Wednesday (July 2), which is the first stake-based cryptocurrency ETF in the United States. The launch of this ETF marks a further integration of cryptocurrency with traditional finance, introducing staking into the ETF investment space and providing investors with a dual value proposition of "asset price exposure + staking returns."

Shortly after the news was released last night, the price of SOL briefly rose by over 6%, approaching 160 dollars, and has currently retreated to around 153 dollars. JTO briefly surged by over 8%, once nearing 2.5 dollars. Although SOL and JTO have now essentially erased all their gains, it highlights the market's strong interest in this product.

Who launched it? What service providers are available?

The fund code for the "REX-Osprey SOL+Staking ETF" is SSK, jointly launched by REX Shares and Osprey Funds.

REX Shares is an innovative ETP provider focused on alternative strategy ETFs and ETNs, known for its MicroSector and T-REX product lines, offering leveraged and inverse tools to traders, and recently launched a series of option-based income strategies.

Osprey Funds was established in 2019 as the cryptocurrency division of REX Shares and became an independent company in 2021. The team has launched over 100 exchange-traded products and invested in Bitcoin as early as 2013.

The fund may indirectly hold all or part of its shares in Solana by investing in the Cayman Islands registered subsidiary REX-Osprey (TM) SOL + Staking (Cayman) Portfolio SP. The fund wholly owns and controls this subsidiary and will consolidate its investments with that subsidiary.

In addition to the issuer, the service providers of the ETF fund include:

• Fund Investment Advisor: REX Advisers, LLC. Matthew Pelletier serves as the portfolio manager for this fund, responsible for the daily investment management of the fund. REX Advisers has held fixed income sales and trading positions at BNP Paribas, Western Alliance Bank, and Susquehanna International Group.
• Commonwealth Fund Services, Inc. serves as the fund manager, overseeing the operation of the fund.
• U.S. Bank provides certain financial management services (excluding services provided by managers) and fund accounting services.
• U.S. Bank National Association serves as the ETF custodian for the fund, responsible for holding and safeguarding the fund's cash as well as the securities issued by the ETF and other non-Solana asset securities, settling transactions for the fund's non-Solana assets, and collecting income from the fund's investments.
• Anchorage Digital Bank National Association serves as the cryptocurrency custodian for the fund, responsible for safeguarding the fund's cash, Solana holdings, and LST, settling the fund's Solana assets and LST transactions, and collecting stake rewards.
• Foreside Fund Services LLC is responsible for the distribution, distributing the additional shares (Creation Units) of this fund on an agency basis.

Fund Strategy Details: From Asset Allocation to Stake Allocation

The main investment strategy of this ETF is as follows:

Core Investment Objective: The fund aims to provide investors with exposure to Solana assets and an additional source of income by tracking the price performance of Solana and generating returns through on-chain stake.

Asset Allocation: According to the documents filed with the U.S. Securities and Exchange Commission (SEC), the fund will, under normal market conditions, invest at least 80% of its net assets in Solana or assets that provide exposure to Solana. The fund may also invest in other ETF shares, including non-U.S. cryptocurrency ETFs, which provide similar exposure to Solana.

Staking Strategy: The fund will seek to stake at least 50% of its holdings in Solana to generate income and achieve capital appreciation. Specifically, the fund will instruct Solana custodians to delegate a portion of the SOL held by the fund (as determined by the advisor) to one or more validators. Rewards will be paid in the form of Solana and will be subject to a lock-up period.

Trading of Fund Shares: The fund is only open to specific institutional investors (such as market makers and brokers) for the issuance or redemption of shares in large units (Creation Units, with a minimum of 25,000 shares per unit). Individual shares can only be traded through brokerage firms on national securities exchanges.

Tax Rules: Taxed as a Regular C Corporation

According to the documents filed with the SEC, unlike most ETFs, this fund will not be taxed as a regulated investment company under U.S. federal income tax due to its limited number of holdings; instead, it will be taxed as a regular C corporation. It is worth emphasizing that C corporations are subject to double taxation: the company's profits are first taxed at the corporate tax rate, and then the dividends distributed to shareholders are taxed again at the individual income tax rate.

1. Fund Level

• Capital Gains Tax: When the fund sells or otherwise disposes of these securities, the internally accumulated securities gains will be taxed at the fund level, and the gains will be subject to corporate tax rates (federal + state taxes).
• Excise Tax: If the total market value of shares redeemed by the fund within a tax year exceeds the total market value of shares issued by 1 million USD, an excise tax (1% on the excess) must be paid.
• Accumulated Earnings Tax: If a fund does not distribute enough profit to its shareholders, it may be subject to an additional 20% tax (on retained earnings).

2. Investors / Holders Level

1. Tax Treatment of Dividend Income

Dividend Tax: If the dividends come from the current or accumulated profits of the fund, they are taxed at the dividend tax rate.

• Corporate investors: Eligible parties can enjoy dividend deductions.
• Individual investors: When the holding period requirement is met, long-term capital gains tax rates may apply (which are lower than ordinary income tax rates).

2. Tax on the Sale of Shares or Redemption of Creation Units

• Capital Gains Tax

Holding for over 1 year: long-term capital gains (lower tax rate).

Holding ≤1 year: Short-term capital gains (at ordinary income tax rate).

Fee Structure

According to the registration documents, the mentioned fee standards are:

• Advisory Fee: The fund advisor REX Advisers, LLC is entitled to charge an annual management fee of 0.75%. This fee is calculated daily as a percentage of the fund's average daily net assets and paid monthly.
• Fund management fees: Fees for the fund manager Commonwealth Fund Services, Inc. are calculated based on the fund's daily average net assets, accrued daily, and paid monthly. The specific fee ratio is not mentioned.
• Financial management and foundation accounting fees: Paid annually based on the total net assets of the U.S. Bank by fund. The specific fee ratio is not mentioned.

What is the impact?

The approval of the Solana staking ETF by regulatory agencies has shifted their attitude towards the crypto staking economy from "cautious observation" to "limited acceptance." This breakthrough sends two major signals to the market:

• The prototype of the compliance framework has emerged: the SEC's approval of staking products means that the integration path between crypto assets and traditional financial instruments has been opened up, and the approval of similar products (such as Ethereum staking ETFs) is expected to accelerate.
• Market confidence boosted: Institutional investors have a significantly higher recognition of compliant products compared to non-custodial crypto assets, and the launch of this ETF may attract long-term capital from pension funds, mutual funds, and others.

Additionally, the launch of this ETF will further solidify the fundamentals of the Solana ecosystem:

• Structural increase in SOL demand: At least 80% of the fund's assets are directly allocated to SOL, which may lead to a massive buying spree.
• Over 50% of positions entered on-chain stake, the increase in stake rate will raise the "holding opportunity cost" of SOL.
• The combination of the staking mechanism and ETFs marks the acceptance of the cryptocurrency economic model by TradFi, potentially driving more mainstream capital into the Solana staking market through compliant channels. At the same time, it will also benefit the staking protocols within the Solana ecosystem.
• The increase in the stake rate will further solidify the decentralized foundation of Solana.

Of course, the "REX-Osprey SOL+Staking ETF" document also highlights various risks, such as SOL investment risks, regulatory risks associated with SOL, risks in the overall digital asset industry, stake risks, liquidity risks, concentration investment risks, cybersecurity risks, custody risks, etc.

It is worth noting that the ETF fund manager Commonwealth Fund Services has simultaneously applied for the REX-OSPREY ETH + STAKING ETF in the documents filed with the SEC. The investment strategies for the Ethereum staking ETF and the Solana staking ETF are similar in the registration documents, and the market expects that the launch of the Solana staking ETF may pave the way for the Ethereum staking ETF.