21Shares Files for SEI ETF with Staking Rewards as Altcoin ETF Race Heats Up

Swiss crypto asset manager 21Shares filed paperwork with the SEC on August 28, 2025, to launch an exchange-traded fund that tracks the SEI token.

SEI is the native token of the Sei Network, a high-speed blockchain built for trading applications. The filing makes 21Shares the second company to seek approval for a SEI ETF, following Canary Capital’s application in May 2025.

What Makes This ETF Different

The 21Shares SEI ETF aims to track the price of SEI tokens held in the fund. But unlike traditional ETFs, this one includes a secondary goal: earning additional SEI tokens through staking.

Staking means locking up cryptocurrency to help secure a blockchain network. In return, token holders receive rewards, similar to earning interest on a savings account. For SEI, current staking rewards offer approximately 5-6% annually across different platforms.

However, 21Shares has not yet decided if staking can legally work within an ETF structure. The company’s filing states they are still investigating whether there would be “undue legal, regulatory or tax risk” and has not concluded that staking can be offered under a public trust structure.

Source: @21shares_us

This caution makes sense given the SEC’s track record. Regulators have repeatedly delayed decisions on allowing staking features in other crypto ETFs, including Grayscale’s Ethereum fund applications.

Competition Emerges for First SEI ETF

21Shares faces competition from Canary Capital, which filed for its own SEI ETF in late April 2025. Both companies want to be first to market with regulated SEI exposure for US investors.

The key differences between the two proposals center on custody and staking approaches. Canary Capital explicitly includes staking rewards as a core feature and plans to split custody between BitGo Trust Company and Coinbase Custody Trust Company.

21Shares takes a more cautious approach to staking while using only Coinbase Custody Trust Company as its custodian. The company will also rely on CF Benchmarks for pricing data across multiple exchanges.

SEI Network Gaining Momentum

SEI currently ranks as the 74th largest cryptocurrency with a market cap of approximately $1.82 billion. The token trades around $0.30, though this remains 73% below its March 2024 peak of $1.14.

Despite the price decline, SEI’s underlying network continues growing. The blockchain processes transactions faster than many competitors and focuses specifically on trading applications. Developers are working on a major upgrade called “Giga” that could boost network speed to 5 gigabytes per second.

The network’s total value locked (TVL) has reached over $669 million, with active protocols including Yei Finance and DragonSwap handling significant trading volume.

Regulatory Environment Improving

The filing comes during a more crypto-friendly regulatory period. President Trump’s administration has taken a supportive stance toward digital assets, and new SEC Chairman Paul Atkins has promised a collaborative approach with the industry.

Recent regulatory clarity on staking activities has also helped. In August 2025, the SEC issued guidance stating that most crypto staking on proof-of-stake blockchains does not fall under securities laws. This development could boost the chances of approval for staking-enabled ETFs.

Industry experts remain optimistic about altcoin ETF approvals. Bloomberg analysts Eric Balchunas and James Seyffart give Litecoin and Solana ETFs 90% approval odds, followed by XRP funds at 85%.

Broader ETF Wave Building

The SEI applications represent part of a larger push for altcoin ETFs beyond Bitcoin and Ethereum. Asset managers including Bitwise, Grayscale, Franklin Templeton, and VanEck have filed for funds tracking Solana, XRP, Dogecoin, Cardano, and other major cryptocurrencies.

This wave follows the successful launch of spot Bitcoin ETFs in January 2024 and Ethereum ETFs later that year. Those products attracted billions in investor funds, proving institutional demand for regulated crypto exposure.

Some staking ETFs have already launched using alternative regulatory pathways. The US Solana Staking ETF began trading in July 2025, combining SOL exposure with staking rewards through a different approval process.

Multiple crypto ETF applications now face SEC decision deadlines in October 2025. Regulators have extended review periods for several altcoin fund proposals, but industry watchers expect a batch of approvals to begin that month.

What This Means for Investors

If approved, SEI ETFs would let traditional investors buy exposure to the blockchain through regular brokerage accounts. This removes the complexity of managing crypto wallets or dealing directly with exchanges.

The staking component could provide additional income beyond price appreciation. However, investors should understand that staking rewards are not guaranteed and depend on network participation rates and validator performance.

SEI’s focus on trading infrastructure makes it different from general-purpose blockchains like Ethereum. The network targets decentralized exchanges and high-frequency trading applications, which could drive adoption if institutional trading moves on-chain.

Looking Ahead

The race between 21Shares and Canary Capital highlights growing institutional interest in SEI and similar trading-focused blockchains. Both companies recognize that first-mover advantage could be significant in capturing market share.

Crypto Pulpit